It’s possible to borrow money in a variety of different ways. However, when looking to Finance new purchases or investments, it’s important you know the difference between the various financing options available to you. Whether through a credit card or loan, what’s the best way to borrow money? The answer depends, so here are some helpful tips you should keep in mind.
Understand the Limitations of Unsecured Personal Loans
One popular avenue of getting financing is through an unsecured personal loan. These loans are popular as they don’t require any security, usually just a credit check and proof of earnings. Hence, they are highly accessible to the vast majority of the population.
Personal loans are a fantastic option under the right circumstances. You can get approval easily, and high-quality lenders will have your money sent to your account in a matter of days. Lots of consumers like to use the loans for vacations and holidays.
Some of the limitations of personal loans are the fact that there’s a limit to how much you can borrow. Generally, the highest unsecured loans available are in the tens of thousands. If you want financing in the six-figure range, you’ll have to look into other options. Also, these loans carry a much higher interest rate than other loans.
Weigh the Positives and the Negatives of Credit Cards
An alternative to personal loans is a credit card. Credit cards are also widely available and relatively easy to obtain. If you already have an account with a bank, it should be very easy to gain approval for one of the credit cards they offer. These cards are incredibly versatile, and come with many positives and negatives you need to consider.
The main positive behind using a credit card is the fact that you can use it for pretty much anything. As long as you’re within the credit limits of your card, you’re free to spend it on everything from expensive dinners to car rentals. Even better, you can gain points for all of your spending, which can add up very quickly. The rewards programs for some cards could mean free business class plane tickets or free vacations.
Along with the many positives of credit cards, there are some negatives. The interest rates of credit cards are some of the highest when it comes to consumer credit. Many cards don’t charge interest for the first few months, but afterward, they often charge incredibly high rates. The interest charges of these cards mean users must be cautious not to overspend or they might accumulate astronomical amounts of debt.
Should You Choose a Loan or a Credit Card?
There are many pros and cons when it comes to choosing between credit cards or personal loans. Ultimately, it depends on your current situation whether you go with one form of financing over another.
If you have a specific item you want to buy, such as a watch, and want the lowest interest possible, it’s better to go with a personal loan. Personal loan interest rates are almost always lower than the rates typical with credit cards. If you want to buy something specific while accumulating as little repayment obligations as possible, this type of loan is best.
If you want a reliable stream of credit for any purchase you want to make in the future, credit cards are the best option. Although credit cards have higher rates, they give you freedom and flexibility. With a card, you can access credit whenever you want, such as if you find something you want to buy while shopping. If you’re looking to boost your spending power, going with a credit card with a fantastic rewards program is a good idea.