Personal Loans vs Credit Cards – what is best for you?
Personal loans and credit cards are both good options to finance smaller projects, such as a holiday or minor home renovations. Which one is the best solution for you depends on your personal circumstances, so here are some points to consider to make your choice a little easier.
Personal loans are a once-off, lump sum payment to be paid off over time. Some benefits include:
• Personal loans typically have lower interest rates than credit cards. If you are using the loan to pay off a product or service over a few years, such as a car or a holiday, a loan may offer better value.
• Personal loans are repaid over a set length of time, such as three years, meaning you know exactly what your repayments are and when you will have the debt paid off.
• The temptation to redraw on payments already made is limited with a personal loan. Some products do offer redraw options, but only if you’re ahead on repayments. That means the loan will still be paid off within the agreed time frame.
• If you have several smaller loans and credit card debts to manage, a personal loan is an ideal way of consolidating all debts and streamlining transactions to one repayment, saving you fees and potentially offering a lower interest rate.
Credit cards offer instant and ongoing access to funds and can be used for all kinds of transactions. You will receive a monthly bill for what you charge to your card. In addition to increased flexibility, credit cards offer the following benefits:
• Most credit cards offer an introductory or balance transfer rate as low as 0% for the first few months. If you can pay off your loan within this introductory period, a credit card could be an option. However, be aware that after the introductory period the interest rate will automatically go up to the standard or a higher rate.
• Credit cards will generally have an interest free period whereby interest is not charged until after a certain amount of time.
• Many credit cards offer reward programs, offering points to collect with each purchase, which can later be redeemed for gifts or vouchers.
If you are thinking about borrowing some money for your next project feel free to leave a comment and we will help you find a solution that is suitable for you.
^Robert Keogh – Chief Executive Officer