When a credit card’s better than a loan
The most important factor here is your credit limit. Credit cards won’t usually give you more than £5,000, and that’s provided that you have a good credit score. So if what you need to buy is more expensive, you’re probably better off looking for a £5,000+ loan. But, if you can buy whatever it is for £5,000 or less, you have several other options. See if any of these scenarios fit you…
Personal Loans Vs Credit Cards
Credit cards vs Loans – Which Should You Use?
It’s always better to pay cash for large purchases, which is why we drill home the importance of saving as early and as often as you can. But life happens —whether you’ve saved for it or not. Sometimes credit will be a valuable safety net to help you ride out financial emergencies or a tool to finance a big purchase —a car, a once-in-a-lifetime vacation or small home improvement project. When these situations arise, most of us simply reach for our closest credit card. Though credit cards are convenient, in some cases a personal loan may be a more sensible and affordable way to pay for a large purchase over time. Here’s a look at personal loans vs credit cards and the pros and cons of each.
How do personal loans work?
A personal loan is an unsecured loan that you can use for just about any purpose: Debt consolidation, a vacation, a vehicle purchase, or a home improvement project. A personal loan works more like an auto loan than a credit card. When you take out the loan you receive the loan amount in a lump sum. You make fixed monthly payments for the agreed upon term (number of months). Personal loans usually have terms between two and five years. Personal loans usually have fixed interest rate. There is no penalty for paying off the loan early. Typically, you can apply for a personal loan entirely online.
To apply, you’ll need to provide your personal and employment information on an online credit application. The bank may ask to see proof of your income, such as a pay stub or W-2 form. Generally, the bank will let you know if you’re approved within one or two business days.
At this point, you’re under no obligation to take the loan—you usually have a week or so to decide. You can review the interest rate and terms of the loan and decide whether it fits your needs.
If you accept the loan, you’ll sign a promissory note and the money will be transferred into your checking account. You’ll then receive billing statements and must make equal payments each month on the due date. Most personal loans come in terms of three