Credit cards and personal loans are similar in the sense that it is all borrowed money, but the two have a few key differences. Keep reading for more info about personal loans vs. credit cards. Find out what makes them different, and which one is better for you.
Personal Loans vs. Credit Card: What’s the Difference?
Personal loan interest rates are lower than credit cards
The most important difference between credit cards and personal loans is the interest rates. On average, personal loan interest rates are under 4% per month, where credit card interest rates can be up to 19% per month for credit cards issued by banks. That may not seem like a lot if you only use your credit cards for emergency purposes, but if you use your credit card every day, those credit card interest fees start to add up and you’ll be paying more interest than necessary.
Personal loans have higher limits than credit cards
Personal loans typically have higher limits than credit cards, depending on your income and credit history. Many personal credit cards max out at $5,000 whereas personal loans can give you anywhere between $500 and $20,000. Personal loans also tend to be a more short-term solution – they’re meant to get you though a financial pinch (such as when you need money to buy a car now allowing you to pay back the money in increments), and not intended to accumulate everyday purchases like a credit card.
No hidden fees when it comes to personal loans
Some credit cards have hidden fees for things you wouldn’t even think of, for example, paper bills instead of electronic bills. Credit card companies also sometimes charge something if you go over your limit, or processing fees for various services such as using a non-bank machine. There are dozens of different ways that credit card companies can gouge you. Cash loans don’t come loaded with all these extra charges. You get your money, and it’s yours to do with as you wish – just make sure you make payments monthly to repay your loan so you don’t default!
Personal loans, on the other hand, have no hidden fees and extra charges, because you are given the money in a lump sum, and only have to pay back what you agree upon in equal payments until the loan is paid off, with no extra hidden fees. Does your income allow you to qualify for a personal cash loan? Check here.
So is a personal loan or a credit card better for you?
Take into consideration the pros and cons of each. Overall, personal loans interest rates are lower than credit card interest rates, and personal loans have higher limits than credit cards.
Personal loans are better for those paying off large payments that take a period of time to pay off (anything between 1-5 years). Credit cards are better for those who are able to pay off the balance in full each month so that interest charges can be avoided.
If a personal loan is right for you, fill out an application now to get started, or call us at 1-877-213-2088.