Both personal loans and credit cards are useful financial tools when you need access to money that you don’t have on hand. However, while a credit card may be more convenient to use, it may not always be the best option when you are in need of funds. Most times, if you need long-term financing, a personal loan will work out to be cheaper. Here are 5 instances when taking a personal loan may be better than charging expenses to your credit card.
Debt consolidation: If you have multiple debts and are struggling to make repayments on time, getting a personal loan to consolidate your debts is something you should consider. Although getting a new personal loan will temporarily affect your credit score, it will work out better for your credit report in the long run. While a 0% APR credit card can also be used to consolidate your debts, the personal loan will likely offer you a higher limit than a credit card.
Medical expenses: Medical treatments in the United States are not inexpensive, especially if they are not covered by a health insurance plan. In this case, when you would rather have a lump sum amount in hand to repay your hospitalization bills, medicines, post-operative care, and trips to and from the hospital, a personal loan, that gives you a lump sum loan amount at an affordable interest rate, is a good option.
Starting a business: When you start a small business, you may need to have a certain amount of capital ready. While a credit card is great to charge smaller expenses to, it’s best that you borrow a personal loan to set up a business.
Home renovation costs: Home renovation costs can run into thousands of dollars. If you are considering renovating your home, you may want to get a personal loan to finance the expenses.
Wedding costs: Credit cards offer rewards for certain types of payments, but wedding-related expenses rarely come under a rewards program. Given this, it’s best to borrow a personal loan to pay for wedding expenses.
Credit cards are a great payment option. However, if you carry a balance, you will attract high interest. In comparison, a personal loan offers you a longer repayment period with a more affordable interest rate that will make monthly payments easier on the pocket.
