In life, you will on occasion be thrust into a financial situation you haven’t been able to prepare for. It’s for these moments that credit exists, to help you out when you most need it. There are many things that can arise and cause a dire financial situation, such as a sudden and devastating illness, a death in the family, or even just any large, necessary purchase you weren’t prepared to make. However, just as there are many different reasons you might need credit, there are also many different sources of credit. The most commonly-used are credit cards and personal loans.
It can often be difficult for a person to choose between using a credit card or a personal loan in emergency situations when one needs a large influx of capital to cover expenditures. They each have their preferred uses, as well as important advantages and disadvantages. This article will go over what credit cards and personal loans are best used for, as well as their important pros and cons.
What is a Personal Loan?
Personal Loans are an important part of the American credit system. They are used by millions of people each year to accrue credit because they’re easy to acquire and don’t require collateral. Personal loans are recieved from a financial institution or lender who deals with these types of loans. The lender will inquire about your credit rating and determine a payment plan that suits your situation. Generally a personal loan can be acquired quite quickly and without hassle, which is great for people who need money fast.
Personal loans have a few distinct advantages. For one thing, if you need a large amount of money quickly and need a longer time to pay off your debt, they are much better than credit cards. Credit cards are generally used to make small, regular payments that are paid off quickly. Another advantage personal loans have over credit cards is that their interest rates are fixed, which means that what you pay will not change over time.
However, one disadvantage personal loans might have is that there can be additional fees associated, such as origination fees or prepayment penalties to encourage you to pay the debt slowly.
What are Credit Cards good for?
Credit cards work very different from personal loans. While a personal loan is a one-time borrowing of a large amount of money, a credit card is used as a form of revolving credit. This means that, with access to a credit card, the user has the ability to constantly borrow amounts of money from the issuer of the card on a regular basis. This implicit contract will, however, be revoked if the user of the card abuses it by not paying their debts.
Like personal loans, credit cards offer advantages. One is that once you have your card there’s no paperwork or any bureaucracy involved in using it, you simply use it. Another advantage is that many cards have no interest whatsoever as long as you pay your debt back within a certain time period. This can make use of these cards quite convenient for those who don’t have cash on them but know for certain they will soon.
Credit cards do have some disadvantages, however. One is that they can’t be used to borrow large sums of money if a big emergency arises. This is a big advantage a personal loan will have over a credit card. Another disadvantage is that rates can change over time, which might leave you in an unpleasant situation you were unable to predict.
How to find a good personal loan
While it’s incredibly easy to get a credit card, not everyone knows how to get a personal loan. If you’re interested in doing so, it’s definitely a good idea to search for lenders who offer personal loans. Fiizy offers users this exact service and gives people who are searching for a personal loan the ability to find the one that matches their needs the best. Aside from online lenders, you can ask your local bank for the terms they offer for personal loans. There are many sources of personal loans available to you in your local area, likely more than you expected.
Personal Loans Vs. Credit Cards
So far, a lot of information has been listed in this article about the pros and cons of credit cards and personal loans. While some of this information might seem complicated and confusing, it’s quite easy to sum up in a reasonable way. If you need a large amount of money and need a longer time to pay off the debt, get a personal loan. Doing so will both help you more and be far cheaper for you in the long run. If you need smaller amounts of money but will be able to pay back the debt sooner, a credit card is likely a better choice for your situation.
If you still aren’t sure what you need for your situation, it might be good to shop around for good rates to determine what works best. Fiizy can help you compare rates with different lenders, which you can compare against different credit card issuers. Whichever you choose to help you with your situation, there’s certainly a loan or credit card out there that’s perfect for you.