Of course, lenders and credit card companies are going to advertise the positives of their borrowing options, but they are not going to mention the potential drawbacks.
Here, then, is what you need to know about making the smartest possible choice when choosing where to borrow money.
When are credit cards the best option?
Credit cards may be the best option for borrowing money, but only if you are able to pay off the money you borrow very quickly. Credit cards may have higher interest rates than personal loans. Even if they come with a lower interest rate, credit card companies only require you to make a minimum payment each month. This means that you may take a longer time to pay off the loan, so you will have to pay higher interest charges overall. If you can pay off the money you charge in one or two months, then credit cards could be a good option. However, carrying a balance for longer than that is not advisable.
When are personal loans the best option?
Personal loans could be a better option because the loans are paid off in installments. This makes repayment easier to manage. Also, personal loans are for a set amount, while you can use credit cards again and again. This means that a personal loan does not encourage you to build up more and more debt.
One of the main drawbacks of personal loans from banks is that you often have to borrow a minimum amount, and the amount may be more than you need. Rather than getting more money than you need, you can skip the bank and instead get an online personal loan. Online money suppliers usually do not have minimum borrowing amounts, so if you only need to borrow $500, that’s all you have to borrow. This will help you control your debt.
Credit card cash advances
You usually want to avoid credit card cash advances unless you need cash immediately for an emergency. First of all, these advances come with BOTH fees and higher than normal interest rates. Second, you may have to pay off your other credit card balance before your payments go to the cash advance, so you could be stuck with this high interest rate for a long time. If you can wait for a few hours before you get your cash, you should apply for an online personal loan. This loan will provide cash just like an advance. The best online lenders will be able to provide funds in a few hours or by the end of the business day.