If you are looking for a flush of cash for a much-needed vacation, how do you plan to go about getting it?
From where we stand, you have two options: apply for a personal loan or use your credit card. You are probably thinking you have already got the latter, so why not max it out? You can always pay the balance back to keep things on track.
What if we told you that this is not a good decision? What if you can’t pay back the balance within the due date? You will be charged a 16% interest rate on the balance you have used if you don’t make on-time payments. That’s A LOT!
Choosing between a personal loan and a credit card can be tricky. Both are great options in different circumstances for different borrowers.
Nowadays, you can easily apply for your loan online with Nifty. As long as you have an online bank set up, you won’t have any problems. This way, the lender will be easily able to assess your information. Thereby, allowing him to decide whether you should get approval for the loan or not. Here are the benefits of taking out a personal loan, as well as its drawbacks:
One of the best things about taking out a personal loan is that your lender acts as the guard to your finances. Since you are approved for a set amount, you won’t be able to spend more even if you want to. This is because your limit is set and your lender won’t allow it.
Example: Sandy wants to renovate her bathroom. The contractor quotes a set amount that will cover the demolition and installation costs, and the expense of buying new things. She knows that these things cost a few hundred dollars more sometimes. So, she applies for a loan, knowing how much she will spend with a little extra for unexpected spending.
Pro Tip: To ensure you don’t miss a single monthly payment, arrange a direct deposit. That way, when the date for the payment will roll around, the principal and interest amount will be paid from your bank account into the lenders automatically.
Another thing that makes a personal loan a great option is you won’t be charged with interest on any of your withdrawals. However, this is usually the case with credit cards. As such this makes the former option much cheaper.
Opt for a fixed payment loan. This way, you will be able to budget and set aside the monthly payment amount as soon as your salary is deposited into your account.
You now know how a personal loan benefits you. Let’s talk about the plastic option:
We like to call this the honeymoon period, an offer that all banks give to people who want to open a credit account. The introductory period, which is typically 1 year, is interest-free.
Example: Samuel has to get some extensive work done on his car. He doesn’t have the money to pay for the repairs upfront but he knows that he can cover it in 12 months if he applies for a 0% intro credit card. By the time the card will revert to a high-interest rate, he will have already paid the balance.
This is a benefit as well as a drawback because when you start using your credit card, it’s hard to stop. On the other hand, when you need immediate cash in an emergency, your credit card comes to the rescue.
Let’s not forget the points and rewards you get every time you swipe your credit card. For example, discounts at restaurants and shopping outlets, along with cashback. These little perks add up over time and give you huge discounts.
We won’t say that a personal loan is a clear winner. However, when it comes to paying for huge, long-term expenses, it is the better choice.
