If you need money for something other than your living expenses, then credit cards and personal loans may be the way to go. If you need money for your living expenses, then you need to improve your budgeting, and you may benefit from an overdraft rather than a personal loan.

An arranged overdraft may be suitable if you are having money troubles. If you are having trouble making ends meet, then credit card or personal loan is not the answer because they will increase your monthly outgoings, which will make it harder to make ends meet. When it comes to personal loans vs credit cards, is one line of credit better than another?

hand holding american money

How Easily May You Get A Line Of Credit?

If you apply for a personal loan with your current bank, then you will probably get it. They may not offer you very much money, but you will probably be approved.

If you apply for a personal loan with another company, then they will probably look at your credit rating and say no. On the flip side, if you were to apply for a credit card with any old company, most of them will say yes without knowing very much about you.

Personal Loans Are Harder To Get

A personal loan is going to give you a lump sum, which is a risk for the bank because it means giving money away. A personal loan is going to have a nice interest rate, which lowers the potential profit that the bank can make from you. Giving you a personal loan is risky for a bank, which is why they want to know lots about you. It is also why they want to know your personal details, which is why there is so much paperwork to do.

A personal loan is going to have a nice interest rate, which lowers the potential profit that the bank can make from you. Giving you a personal loan is risky for a bank, which is why they want to know lots about you. It is also why they want to know your personal details, which is why there is so much paperwork to do.

You do have some loans types such as peer to peer loans (from say example, Lending Club or Prosper) which might be easier to obtain the traditional personal loans from a bank or credit union might be). Also consider loans from online lenders like Lending Tree — they are easier to apply for than from a bank and they may be more flexible as to whom they give the loan to (i.e. less stringent). Banks and Credit unions tend to be more conservative.

Credit Cards Are Easier To Get

You may receive letters through the mail where you may apply for a credit card. Credit card debt is so difficult to get out of that the companies issuing cards do not mind if a few people let them down and do not pay them back because they know that most people will get into debt and pay them interest for years.

They know that some people are going to become stuck in credit card debt, and that is what they are counting on so that they can enjoy interest payments from them for the rest of their lives. If you need money fast, then research the best credit card you can get for your current credit rating and apply for it.

How Difficult Are They To Pay Off?

Any form of debt is difficult to pay off because it involves taking some of your liquid cash and paying it away to another company. It means giving yourself an extra expense that runs months and years into your future. All types of debt are difficult to pay off, but some are more difficult than others.

Personal Loans Are Very Easy To Pay Off

Compared to credit cards and overdrafts, it is fair to say that personal loans are easier to pay off. All you have to do is keep paying the installments when they are due. Eventually, your loan will be paid off. In addition, some personal loan companies allow you to put extra money into your account so that the debt is paid of quicker

Credit Cards Are Very Difficult To Pay Off

The first reason it is difficult is because you are charged interest every month that is removed from the credit card account. If your interest is $100 per month, and you put $300 into your credit card account, then in three months your money will be gone. You are against the clock when you are paying off your credit card.

It is possible to max out your card and simply pay the minimums for the next few decades if you are not careful. Plus, when you do put money onto your credit card, there is always the temptation to spend the money on your card. That fact alone may hold you back from paying your credit card debt off.

Which to choose credit card or personal loan.

Which Has Short Term And Which Has Long Term Benefits?

Credit cards and personal loans offer you very different types of debt. A personal loan puts a lump sum in your account where you may spend it at will. You cannot replace that money right away and clear your debt because the interest is already added on.

A credit card will allow you to draw out the money and replace almost all of it with the exception of the withdrawal fees. A credit card only charges you for the money you use, whereas your personal loan charges you for the entire amount, even if you put the money back into the loan account.

Credit Cards Have A Short Term Benefit

Let’s say you max out your credit card, and your minimum repayment amount is $90. Then, let’s assume you put $200 on your card. Your balance would start out at $200 in credit and X amount still in debt. Then, within 30 days, your minimum payment amount would be deducted and you would have only $110 in your account.

A short-term benefit is that you may spend that $110 again if you wish, whereas if you put money into your personal loan account, then you cannot touch it again because it is considered a loan repayment. The fact you are able to access the money you overpay on your credit card is a blessing. It means that if you are strapped for cash, then you may re-borrow the money you put back into your credit card

Personal Loans Have A Long Term Benefit

A credit card will help your credit rating if you pay off the balance every month, but that is not how many people handle their credit card debt. Most people max out their credit card, or leave a large balance on their card that they cannot pay off before the next payment cycle.

Doing this is not good for your credit rating. The long-term benefits of personal loans are that they help your credit rating. Keep up the payments and it makes you look good. Keeping up with your payments and not missing any is a great way of showing that you can handle your money and your debt very well. The long-term benefit of personal loans is therefore that your credit rating will improve with far fewer ways that things may go wrong.

What Perks Does Each Line Of Credit Have?

The way each type of debt works is a perk, such as the perk of having a lump sum from the personal loan people, and the perk of having a set amount waiting for me on my credit card. A perk of having a credit card is that you may use it in many different countries, but then one could say that all you need is an exchange office and you may exchange the lump sum you received from your personal loan into whatever currency is going used right now.

Credit Cards Offer Rewards For Their Use

The rewards they offer varies from card company to card company (read our best reward credit card list) A common credit card perk is travel miles. They work by giving the user points for the money they spend. For example, you may get a point for every dollar you spend. That is then turned into miles when you travel somewhere on a plane. The miles are knocked off the total amount for the trip. There are other perks too, such as theft protection, and so forth.

For example, you may get a point for every dollar you spend. That is then turned into miles when you travel somewhere on a plane. The miles are knocked off the total amount for the trip. There are other perks too, such as theft protection, and so forth.

A credit card is very handy to take abroad because it allows you to withdraw money in different currencies while you are in a different country.

Personal Loans Offer A Very Low Interest Rate

One of the biggest benefits and rewards for using a personal loan is the very low interest rates you receive.

Personal loans offer a very cheap way to borrow money. The interest rate on your personal loan may vary from 3% to 8%, whereas the interest rate on your credit card may vary from 13% to 99%.

Your interest rate, of course, depends on your credit history. Better credit history means better interest rates on your personal loan. So you’ll want to make sure you know exactly what your credit history is (use Credit Sesame to check it  for free)

Credit cards are easier to get because they have higher interest rates and they offer a means of credit that makes it difficult to get out of debt. Personal loans give you a cheap way of getting into debt, and it is not very difficult to get out of debt with personal loans.

The pros and cons of personal loans and credit cards

Conclusion – Which You Should Use Depends Upon Your Circumstances

As you can see by the article written above, it depends on your needs and your circumstances as to if you get a credit card or a personal loan. For example, if you have a terrible credit rating, then a credit card may be all you can get. On the other hand, if you want cheap debt, then you may use your good credit history to negotiate a low APR rate on a personal loan.

Credit cards and personal loans have their own pros and cons. It is up to you to pick which suits you the best and which may cause you the most problems.