Simple guide to Credit Card and Personal Loans
If you are looking for the difference between Credit Card and Personal loans or you want to know out of the two which would suit you better. Then you have come to the right place. In this article we will tell you the basic difference between Credit Card and Personal Loans. Also we will tell you which one you can choose based on your needs and how Credit Card and Personal Loans work. Broadly categorizing Credit Card and Personal Loans both are basically ways of borrowing money to deal with your needs. These loans need to be paid back to the bank with interest. Where they differ is on what kind of loans do you want to take.
For choosing between Credit Card and Personal Loans you need to first recognize how much money you want to loan and how much time do you need to repay it. You also need to see your credit score before you make any kind of decision regarding it.
About Personal Loans and how and when to use it
You should use personal loans only when you plan on covering the expenses of a big event, a vacation, renovation, buying a new car, education. They can also be used to consolidate credit card debt or starting a business etc. If you cannot pay off your balance fully each month then you should consider applying for personal loans. Since in personal loans you are given a larger time period to pay back the money borrowed. Moreover Personal loans have lower interest rates then credit cards. Here is how to use personal loans:
- You apply to a bank for personal loan and give your credentials.
- This is an installment debt so you get the money in a lump sum.
- You pay back the money with the interest over a specific time period (2-5yrs).
About Credit Cards and how and when to use it
You should use credit cards for monthly or day to day expenses and paying of the bills. You must pay back the money monthly as well so as to avoid added interest charges. Credit cards are unsecured loans and have no collateral attached to it. Unfortunately credit cards have a very high interest rate. Thus they must be used only for short time purposes and payed back immediately by the end of the month. Credit card debt is revolving debt and each card has a certain amount of debt you can be under if you do not pay back on time. Here is how to use it:
- After obtaining your credit card you can use it whenever you want but after the month you should pay 1%-3% of the balance. To avoid interest pay the full amount.
- Interest is calculated by calculating the daily balance.
- You credit can come with travel or cash rewards you can use.