personal loans vs credit cards

First, a little background…

As you know, a credit card allows you to spend as much money as you want… whenever you want… as long as you can pay the bill each month.

With a credit card, you have no limit whatsoever on how much you can charge.

On the other hand, a personal loan has a fixed amount of money you are allowed to borrow… and… you must repay the full amount plus interest. With a personal loan, the amount of interest you have to pay is often higher than the amount of the loan itself.

credit cardsIn addition, there are many types of personal loans: secured, unsecured, line of credit, seller finance, and more.

Secured personal loans are almost exactly like a bank account.

You can use the money for anything at all… as long as you pay back the loan with interest. Unsecured personal loans are often easier to get than secured ones… but… they are not as safe as a secured loan.

You still have to pay back the loan… but… if your financial situation changes for the worse… your lender cannot take back what you have already paid.

If you have bad or no credit, you might be able to get an unsecured personal loan by showing up in person at a local branch office of a large bank or financing institution.

Another option is to go on the internet and apply for an unsecured personal loan using an online personal lending website. There are many websites offering this type of service and eager to lend to people with poor credit.

Once you get your loan, make sure you read all the fine print… because… it will almost certainly contain additional charges you weren’t aware of.

A common one is “early payment penalties”.

This is when you have to pay a fee if you pay back the loan earlier than the lender wants you to. In some cases, early payment penalties can be as high as 20%!

There’s also the “minimum payment” required from you each month.

This is the amount you must send the lender… no matter how small or large your loan balance is. If you do not make at least the minimum payment every month… your loan will be considered late… and… you will start to accrue extra interest charges.

What if you cannot afford to make the payments on your personal loan?

That’s when it can get really ugly.

Your lender can begin to garnish your wages… or even take legal action against you and seize your property. In some cases, they have the power to put a lien on your property which will remain there until the loan is paid in full. P

Personal Loans Vs. Credit Cards: Which Is Best For You?

Now that you understand the difference between a credit card and a personal loan… and know the potential dangers of not using either one… it’s time for you to make an intelligent decision about which would be best for you in your particular situation.

Let’s start with the positives of having a credit card.

First and foremost… a credit card gives you instant credit. That means… if you use your credit card wisely… you can go out and get what you want now… instead of having to wait for “future credit”. Instant credit can be a real lifesaver.

Let’s say you’ve had a string of bad luck… and your bank has decided they no longer want to lend you money.

If you have a credit card, you can go out and spend money you don’t really have… on things you don’t need… and… pay for it over time.

This will give you some much-needed positive credit… and… perhaps get your bank to change their mind about not lending you money.personal loans

Credit cards also offer tremendous freedom. A credit card lets you spend as much or as little money as you want… as long as… you pay the balance in full each month. There are no hidden charges. If you go over your “limit”, there is always an extra fee… but… it is clearly and easily identified.

And, there are no interest charges until the next monthly payment date. In many cases, a credit card can even be a profit center. If you use your credit card wisely… it can be a huge money-making machine for you.

Not only that, a credit card can actually improve your financial situation by allowing you to  spend more money than you have!

And now for the negatives of having a credit card.

The first and most important negative is… a credit card almost guarantees you will get into debt. The very act of using a credit card… automatically… puts you on a slippery slope to financial oblivion.

Here’s why: If you don’t use your credit card wisely… you will end up spending more than you can afford to pay back.

As you see, it’s up to you to decide what to use.