Making The Choice Of A Personal Loan Instead Of Using A Credit Card
How’s your financial life been treating you lately? Do you face money problems by the end of the month? You are probably tempted to swipe your credit card and solve it all.
Well, whatever the reason, we recommend hiding that piece of plastic because it won’t do you any good. In fact, you are likely to go into debt with every swipe!
We suggest getting a personal loan instead. In case you are wondering about its limitations, a personal loan can be borrowed for any reason, from covering medical bills to car repair payments.
Don’t just take our word for it. The following three reasons will tell you why getting a personal loan is a better option:
One of the biggest concerns many borrowers have when applying for a loan or credit card is the interest rate. For a credit card, the interest rate can vary, and the more you spend in a billing cycle, the more you will have to pay.
For a personal loan, the interest rate is usually fixed, which means you will know how much you have to pay monthly. You have the option to choose an unsecured loan, allowing you to protect your assets. You need to have a Good credit score to get a competitive rate. You can set the terms to fixed interest and pay the same monthly amount.
You Can Avoid Any Damage To Your Credit Score
We all know that having a Good credit score is one of the most significant factors in securing a loan. The higher your credit score, the better the terms you will get. When you apply for a loan, the lender makes a hard inquiry into your credit score, which reduces it by 5 to 10 points.
If you default on a payment, you can save your credit score by making the payment in the grace period. When it comes to a credit card, if your credit utilization ratio is high, your credit score will take a big hit, reducing your future chances of getting a big loan, such as a mortgage.
You Spend Wisely
Hear us out: With a credit card, you can spend up to a certain amount, which might exceed what you earn. This makes it difficult to pay down your balance because you have other responsibilities. On the other hand, the limited amount you get in a personal loan allows you to prioritize and spend wisely.
For example, suppose you have to pay a medical bill of $5,000. In that case, you can get the exact amount, pay it upfront, and then instruct your bank to automatically cut the monthly payments when your salary is deposited into the account.
In conclusion, a personal loan is better than a credit card because its interest rate is low, does not impact your credit score much, and allows you to spend wisely.
Of course, personal loans are not perfect. They have expensive closing costs and penalties in case you miss a payment.
So, make a budget first to find out if you can cut any unnecessary expenses and pay the bills without taking a loan. If you still find yourself at a standstill, approach a lender.
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