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Personal Loans vs. Credit Cards – Which one is Right for you?

Posted September 11th, 2009
by Staff


If you are in need of a short-term unsecured loan, you may be considering using a credit card or taking out a persona loan.

Which Option is Best?

Both a personal loan and a credit card can offer an unsecured form of cash when needed most. From a car purchase to a new furnace, cash through a personal loan or credit card may come in particularly handy when cash is needed and money is tight.

Both credit cards have their share of advantages and disadvantages, but which one is right for you?

Understanding the Pros and Cons

Like any other financial decision, one size does not fit all. What is good for you financially may not be right for another individual. However, there are a number of pros and cons associated with both credit cards and personal loans, so it is best to educate yourself before deciding which type of loan is right for you:

Credit Card Pros

  • Easy to Use
  • Flexible Credit Lines
  • No Loan Application
  • Quick and accessible for most consumers
  • Low interest rates, at times (including low promotional rates)
  • No penalties for early repayment
  • Minimum payments for months when money is tight

Credit Card Cons

  • Higher interest rates, at times (particularly for cash advances)
  • Interest rates may be raised if payments are not made on time
  • You must pay finance charges on any remaining balance each month
  • Creditor may raise interest rates or minimum payment amounts
  • Paying only the minimum payments will extend the loan for a considerably longer period of time

Personal Loan Pros

  • Fixed interest rates and monthly payments for consistency
  • Offers a variety of repayment terms for individual needs and budgets
  • Upfront cash to handle all expenses and bills
  • Quick and accessible for most consumers
  • Competitive interest rates

Personal Loan Cons

  • Longer loan application process
  • May be harder to secure than a credit card

Your ability to obtain quick cash, either through a credit or personal loan, will vary according to your credit score and your financial needs. It is always important, however, to consider all of your options before taking out any kind of loan or credit line.

Categories: Advice


What people are saying:

Share Your Thoughts
  • Posted October 19th, 2009 by Molly at 6:48 am -

    I like how you’ve discussed the pros and cons here. A very informative article.


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