Asking if a personal loan is better than a credit card is like asking if an apple is better than an orange. Both are forms of credit and both are equally as useful as each other, depending on the situation. Both have different features.
Credit cards:
Credit cards have some distinguishing features that may include:
- Credit limits of credit cards vary from $500 to $100,000 and over. The credit limit on a credit card depends upon a number of factors including income, assets and liabilities as well as an applicant’s individual credit rating.
- Credit limits are renewable. This means that a credit limit of $1000 can be used over and over and over each time the balance is repaid.
- Credit Cards have flexible repayment systems where all the amount outstanding can be made or the minimum repayment can be made.
- Credit cards often have introductory interest rates for specific periods of time (term).
- Credit Cards often have balance transfer options, where a consumer may transfer an outstanding balance to a competitor’s 0% interest credit card and avoid interest.
- Credit Cards can often be obtained quickly by applying online ie. instant approval credit cards.
- Some credit cards offer rewards programmes, where customers can earn points by making purchases using the card. These points can later be redeemed for rewards.
Personal Loans:
Personal loans have some distinguishing features that may include:
- Amounts range from $3,000 to $100,000 and beyond.
- Personal loans generally have a lower rate of interest than credit cards.
- Personal loans accrue interest immediately. There are no interest-free days as there are with credit cards.
- Personal loans have a set term and repayments to be made each month.
- Competitive personal loan interest rates
- Personal loans may have penalties where the loan is repaid early.
