8 Scenarios When Personal Loans Outweigh Credit Cards
Borrowing needs of everyone are different, and this current era of advancement and lavish lifestyle has changed the way people spend money. When we need to borrow, what are our feasible options? A credit card and a personal loan are the first things to pop into our mind. Many of us are accustomed to the habit of using the credit card for every other thing. However, there are some ideal situations where personal loans are a better option than credit cards.
Credit cards are ideal for short-term expenses. These are the expenses that we can pay off within a month. Whereas, personal loans are best used for long-term costs.
But what are the suitable scenarios that determine a personal loan as an ideal choice? When to opt for personal loans rather than using the credit card?
To wipe-off this confusion, it is essential to know how personal loans are best suited for borrowing situations. Nowadays getting a personal loan comes with a single click. The instant personal loan has changed the loan disbursement process entirely. You can quickly get an online personal loan by filling up the necessary information and uploading the required documents.
Here are some benefits and ideal scenarios when personal loans outweigh credit cards:
1) Constancy Created by Fixed Interest Rates
With a personal loan, you can get you a lump sum amount of money and pay it back over a fixed term. So, when the loan agreement is signed, the interest rate is fixed for the entire repayment period. This means that the interest rate does not fluctuate, and the payments remain fixed.
2) Gives Stability to Monthly Budget
Payments with instant personal loan stay the same every month. So, one does not have to worry about the compulsion to make the minimum monthly payment like with a credit card. Also, unlike credit cards, monthly payments on a personal loan don’t change. This helps you adhere and stick to your monthly budget.
3) Lower Interest Rates than Credit Cards
When you need a lump sum amount right away, a personal loan is a great financing option as the interest rates on personal loans are substantially lower than the interest rates on credit cards. So, choosing a personal loan as your financing option means that you are saving your interest.
4) To Start a Business Venture
With the uncertainty involved in building a business from scratch, credit cards are an extremely risky way to fund the business proposal. Personal instant loans are suitable options as you can tailor the terms of a personal loan to minimise your risk.
5) For a Grand Wedding Affair
Everybody wants to make their wedding a memorable day of their life. But weddings are a costly affair. Every passing day comes at an added expense. You need money for the wedding venue, bride and groom attire, food, jewellery, photography, travel and the list go on. For the ever-rising wedding expenses, it is advisable to get an instant personal loan, rather than swipe your credit card everywhere.
6) For Emergency Medical Expenses
Health care expenses have touched the sky, and any unforeseen event can surely wipe-off a massive chunk of your saving. In such a scenario, you can opt to take out an instant personal loan to pay off the medical expenses rather than using the credit card.
7) Home Improvement Decisions
Personal loans are best suited for home improvement projects. A home renovation or improvement decision can come with enormous costs. You may want a living room makeover, or remodel your kitchen, or change the bathroom fittings and lightings. These may lock up lakhs of rupees. For such high expenses, credit cards are impractical.
8) Debt Consolidation
Although it is possible to consolidate the debt within a credit card, once the debt reaches a certain amount, paying it off becomes difficult, and then the post-introductory interest rate can be exorbitantly large.
But if you need help staying on track, and require more time to pay off the debt, a personal loan with fixed payments is a better approach. Credit card debt consolidation with a personal loan typically makes sense if you get a lower interest rate than you pay on your existing debt.
Personal loans are useful in the above scenarios as they are:
- Suitable for large one-off purchases
- Lower interest rates than credit cards
- Can be cheaper in the long-term
- Ideal for large debt consolidation
- No temptation to overspend
- Repayment schedule is stable and fixed
- Apt for borrowing over a long-term
Credit cards and personal loans are two forms of borrowing that offer attractive benefits, but your borrowing limit determines your best-suited choice. As an informed borrower, be sure to compare your options and make an informed decision.