In this article we’re going to look at the differences between a personal loan vs. credit card. The differences are very substantial and you should know what’s really involved in a financial decision before making one. We’ll also discuss why […]
In this article we’re going to look at the differences between a personal loan vs. credit card. The differences are very substantial and you should know what’s really involved in a financial decision before making one. We’ll also discuss why it’s always best to get a home equity loan.
A personal loan will give you access to additional funds you need, whether it’s for debt consolidation or something else. It won’t be a problem for the bank to approve your application, but some lenders may charge a higher interest rate than you’re comfortable with.
With a personal loan, however, the additional money you borrow isn’t an accounting creation; it’s actual cash that you can use when you need it. With a credit card, you’ll end up having to repay the principal and interest payments every month. You don’t need to worry about having to pay back the cash; it’s gone once you pay the monthly minimums. However, if you let it grow out of control, you might be liable for a much higher interest rate because you’re having difficulty paying the balance in full every month.
A home equity loan allows you to use your house as collateral for a larger amount, and the lender has complete control over the situation. With a home equity loan, you only pay a fixed interest rate; the interest is set according to the market value of your home.
A personal loan will usually have a lower interest rate than a credit card; however, it may have a higher balance due. This is because it will be set up to be a secured loan, which means that the bank can take your property as collateral if you don’t pay it back. Also, the monthly payments will probably be lower with a home equity loan than with a credit card.
The best way to compare these two types of loans is to look at what benefits each has and how it differs from a credit card. The reasons for this may surprise you.
A personal loan allows you to access the money you need without having to prove that you’re financially stable. It also allows you to access emergency funds whenever you need them. It’s much easier to get approved for a personal loan when you’ve already got a positive credit rating; you won’t have to prove that you’re capable of repaying the loan.
A home equity loan gives you access to money as if you were renting, without the mortgage payments. There’s no monthly payment until you’ve used the money.