When it comes to financing a purchase or consolidating debt, you have a few options to consider. Two of the most popular choices are credit cards and personal loans. But which one is best for you?
To help you make an informed decision, we’ll outline what each of these funding sources is and the key differences between credit cards vs. personal loans.
Credit Card vs. Personal Loan
Credit cards are also known as a form of revolving credit. This means as a qualified member with Best Reward, you’ll have a certain amount of money that can be used and paid down repeatedly as long as your account stays open.
You’re given a credit limit, and you can spend any amount up to the maximum and repay it in flexible installments. Our Visa cards offer competitive rates and variable terms. Personal loans are repaid in installments. They have terms such as two years or five years, with fixed monthly payments scheduled to pay off your debt by the end of the term.
The best way to use a credit card is for small, everyday purchases because they can be paid off over time without penalty with on-time payments. On the other hand, personal loans are more suitable for larger purchases such as home renovations or for consolidating debt like a student loan or car loan debt.
Pros of Credit Cards
Credit cards are relatively easy to get if you have a decent credit score. Our Best Reward Visa credit cards also offer rewards for travel and merchandise!
Credit cards also provide convenience and security. You can easily use your card worldwide for purchases in-store or online. The flexibility of a credit card allows you to tailor the monthly payment to suit you. You can pay off your balance in full, pay the minimum amount, or anything in between.
Cons of Credit Cards
One of the main drawbacks of credit cards is how quickly you can accumulate debt if you overspend. The ongoing access to credit, coupled with the convenience of using a credit card, may tempt you to continue racking up your balance.
Credit card interest rates tend to be higher than personal loan interest rates. Make sure you always pay your balance in full each month to avoid paying interest charges on top of what you’ve already spent.
Pros of Personal Loans
Best Rewards’ personal loans offer low-interest rates and fixed monthly payments for easier budgeting. You have the option to make sure your monthly payment is manageable by looking at the loan term alongside your credit history. One of the major perks of a personal loan is that your funds are provided in one lump sum with higher borrowing limits.
A personal loan could be the better option for you if you need to fund large projects or purchases. You’re less likely to overspend when taking out a personal loan because it isn’t revolving credit. Therefore you won’t have access to any additional funds until they’re repaid and reapplied for again in the future.
If these advantages align with the funding you need, read more about how to apply (and get accepted) with us at Best Reward today!
Cons of Personal Loans
Much like credit cards, there are also downsides to personal loans. Fixed monthly payments allow for steady, even payments but this may not work for you. The required monthly payment doesn’t change for your entire loan term—so this may not be the best option if you don’t have a steady income.
The overall cost of taking out a personal loan could be a deciding factor for you. You pay interest on the whole amount from the start. Be sure to ask if there are any additional fees like origination fees, upfront fees, and prepayment penalties - these are not present with Best Reward!
Make Your Choice With Best Reward!
You’re now able to weigh the pros and cons of credit cards and personal loans to make a decision about which type of financing is right for you. Choose a personal loan for lower interest rates, fixed monthly payments, and if you are easily tempted by revolving credit.
Credit cards, on the other hand, are better for you if you want to have access to a line of credit for small, everyday purchases and want to pay off the balance over time. Whichever option you choose, it’s important not to borrow more than you need to stay financially fit in managing your debt.
Read more below to help guide you to the best option with Best Reward!
Credit Cards and Personal Loans