Personal Loans or Credit Cards?

Credit CardLending is an old practice dating back hundreds of years. The concept of lending is even older than the concept of money. Indeed, lending existed during a time when people only used the barter system.

Nowadays, lending is a complex web of interest, transactions and funding. Lending allows you to borrow someone else’s money to use for your own finances. It gives you access to a large amount of money that you would not be able to obtain otherwise. You then pay it back over time in bits and pieces, keeping an eye on the interest rates as well.

Borrowing for Personal Expenditures

For personal investments, most people choose between personal loans and credit cards. According to Rapid Loans, personal loans are a type of short-term loan that can finance personal expenses such as car repairs, holidays, rental fees and the like.

Personal loans, unlike other types of loans, have repayment periods of six to 36 months depending on the plan. You can use the money for anything.

Credit cards, on the other hand, use credits to pay for an item over a period of several months. You pay your credit card bill every month. The major advantage of a credit card is you get an interest free period, which usually lasts over a short period of 30 to 59 days. After that, the average interest rate is about 18%.

Choosing One over the Other

Reuters mentions that a personal loan is a better choice if you do not have any assets, and need money in a hurry. You can apply for a personal loan online with minimal fuss. Some lenders approve the loan in as little as 24 hours from the time of your application.

Personal loans are great for emergencies, such as for home repairs or car repairs not covered by insurance. The major downside to personal loans is that the interest rates are rather high.

Credit cards are ideal for buying smaller, luxury items, such as an expensive coat or a meal at a fancy restaurant. If you are good at keeping up with your payments, a credit card allows you to purchase items at their original price. You just have to stay within the interest-free grace period.

Choosing a personal loan or a credit card depends on your circumstances. Both options are useful for financing personal expenditures.