When there is a large expense and you need immediate access to funds, you can consider two options – credit card or personal loan. While the credit card is a common financial tool people like to choose, we will see why a personal loan is a better choice of the two.
What is a Personal Loan?
You can only buy a home with a home loan, fund education with a student loan or buy a car with a car loan. Loans like these are earmarked for specific purchases only. That is not the case with a personal loan. You can use a personal loan for any purpose.
You can approach any lender like a bank or use online personal loan apps like MoneyTap to apply for a personal loan. Such apps offer quick documentation, approval and loan disbursal.
5 Examples Where Taking a Personal Loan is Better
● For a Wedding
Weddings are a lavish affair where you shouldn’t spare any expense to make it special. However, it would be difficult to put all the wedding costs on your credit card and pay them within the required time frame.
By taking a personal loan for wedding expenses, you can save a sizeable amount on interest charges, especially if it has a lower rate than your credit card.
● Consolidating Debt
Debt consolidation is when you take a new personal loan to repay all the previous loans. You can use your credit card but if you have a huge debt, you would be unlikely to pay off the credit debt within the required period. Moreover, the interest rate of credit card is also high.
A personal loan gives you access to a considerable size of funds, using which you can consolidate the debt. You also get a better interest rate for that.
● Financing a Purchase
You can finance a purchase based on whether it is a need or a want. You can take a personal loan and pay the seller in cash instead of financing through the seller.
However, it is important that you do not make an impulsive decision about financing. Ask the seller if they can give you any offer and compare that to what you could get through a personal loan. Based on that, you can decide which would be the right option for you.
● To Cover Unexpected Healthcare Expenses
Unexpected and uncovered health expenses can burn a hole in your pocket. You may not even have the required cash in hand. In such cases, consider taking a personal loan to cover all the medical costs.
● For Home Improvement Projects
Home improvement requires a lot of planning and budgeting. You will be spending on materials and contractors, none of which will come cheap. Instead of using your credit card multiple times to buy the required items, you can take a personal loan and use the cash to finance the project.
In most instances, it is better to take different types of personal loan rather than swiping your credit card. However, be diligent about paying back the loan on time.