In today’s world of rising prices and necessary luxuries, it’s nearly impossible to pay cash for everything. Your ideal financial plan should involve saving for emergencies and major purchases, but that’s not always realistic. When you are faced with a big expense, you might consider taking out a personal loan or using a credit card in order to make the purchase. According to MoneyUnder30.com, a personal loan may be a less expensive option for you, whether you are purchasing new furniture, taking a vacation or paying off debt.
When Should You Choose a Personal Loan Instead of a Credit Card?
You should use a personal loan for a large expense that may cost several thousand dollars, and could take you a significant amount of time to pay off. For example, if you want to take a vacation that will cost $7,000 and you will need two years to pay it off, a personal loan may be a better option than charging it on a credit card. You will pay less in interest, especially if you secure a competitive interest rate from your lender. If you are making a purchase that is less than $1,500 and will take you less than 18 months to pay off, then you should consider applying for a credit card that offers 0% APR for a short period of time, such as 12 months or 18 months. Always make sure to pay off your balance prior to the end of the promotional period.
You should choose a personal loan over a credit card if you can secure a great deal from a credible lender. Many personal loans require the applicant to pay an origination fee, which can be up to 5 percent of the loan amount. This fee must be paid upfront. Choose a lender that offers a low APR as well as a low origination fee. In the best case scenario, you may find a lender who does not require an origination fee.
Personal loans can be obtained from a variety of sources, including banks, credit unions and even peer-to-peer lending sites. It’s important to work with a reputable lender and to also seek out a competitive rate. Note that your own credit history and credit score will determine the interest rate that will be set for your loan. The better your credit is, the lower the interest rate will be.
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