Personal loan or credit card?

Personal loan or credit card?

2 June 2008

Many people wonder whether they should make more costly purchases using a personal loan or if they should just put it on their credit card. Mostly, it depends on where you can get the best deal, as both options have their upsides and downsides.

Using a credit card to finance a car or similar sized purchase has become possible thanks to larger credit limits being extended to more customers, but there are many pitfalls inherent to using a credit card for large purchases. Unlike with a personal loan, it is unlikely you will have to repay at a rate that is higher than the interest you are charged. This means you will have to be diligent in making substantial repayments, or else you could be charged much more interest than you need to be. Credit cards are designed to make as much interest from you in the long term as possible, whereas a personal loan should only make a specific amount of profit in interest that you can easily calculate.

A personal loan can have a higher interest rate than a credit card, but it is likely you will pay less interest over time and you will normally be able to borrow a larger amount than you could on a credit card. You will also need to pay off the principle as the loan progresses, which may not seem advantageous until you consider that you could otherwise be left to pay interest off credit for the rest of your life. You can also secure a personal loan, allowing you to benefit from a lower rate and borrow even more than you could on an unsecured personal loan or credit card.

Please visit our comparison page if you would like to apply online for a low cost personal loan.

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