The Advantages Of Taking Out Personal Loans Rather Than Credit Cards
Do you have a large expense coming up? Large expenses — such as car repairs, medical bills or home repairs — can crop up unexpectedly, and when they do most people will turn to credit cards. But credit cards aren’t always the best solution. Small loans, such as personal loans, are usually preferable to credit cards for a variety of reasons. Before you reach for the plastic, consider these benefits of personal loans.
Personal Loans Are More Affordable
There are many fees and charges associated with credit cards. If you need cash, you will usually be paying a high interest rate and you may need to pay a convenience fee. If you’re going to be opening a new credit card to pay for your expenses, annual charges may also accrue. A personal loan usually involves only a low interest rate, and the interest rates are almost always lower than a credit card’s.
Personal Loans Improve Your Credit Long-Term
Your credit score isn’t just based on whether you pay your bills on time. Creditors also look at something called “variety of accounts.” If you have only credit cards, your credit score will be lower than if you have both credit cards and personal loans. It’s because creditors want to see that you can handle many types of credit. Thus, getting a new personal loan (and paying it properly) can actually improve your credit.
Personal Loans Can Be Secured
Is your credit score poor? If so, you may have a hard time getting a credit limit that lets you pay off all your bills. One alternative is a secured personal loan. Personal loans can be secured with the value of an item such as a car. If you have equity in a vehicle or in your home, you can get a loan more than what you would be able to get unsecured.
Personal Loan Rates Are Fixed
Have you ever missed a payment? It happens sometimes and it isn’t always your fault. If you miss a payment on a credit card, you get switched to a “high risk” rate which can be easily twice as much as your ordinary interest rate. With a personal loan, your rates are fixed. You may need to pay a one-time late fee — which will be a fairly reasonable charge — but you will continue paying the same low interest rate.
This doesn’t mean that credit cards don’t have some benefits. If you can pay them off quickly, credit cards will often offer you rewards such as airline miles or cash back. But that only holds true if you can pay them off quickly. If you can’t pay off your credit cards within a few months, a personal loan will usually be preferable. Contact EZ Loans Inc for more information.