Whether you’re making everyday purchases, such as groceries or gas, or unexpected ones, such as car repairs – you’re probably used to using your credit card. Just a quick swipe of your card and you’re on your way. But is a credit card always the best option? Don’t ignore personal loans for those unplanned expenses. If you can’t pay off your credit card in full every month, you shouldn’t be using it.
While it may not be obvious at first glance, a personal loan is often a better financial choice for several important reasons.
Personal loans have set monthly payments. This is important because it helps you pay off what you owe faster. If you borrow money with a 12-month term, you’ll have 12 monthly payments to make until the loan is repaid.
Your credit card only requires that you pay the minimum amount each month. With minimum payments ranging from 3-5% of the owed balance, it could take you several years to repay even a small balance.
Eliminate Extra Interest
Because a personal loan has a set time limit to repay the balance, this helps reduce the interest you pay. It actually saves you money in the end! Credit cards, on the other hand, only require the minimum payment each month. This often results in more time to repay the balance – which leads to you paying more in interest each month.
Plus, the interest rates on personal loans are usually much lower than high-interest credit cards issued by stores and banks today. Many of the popular rewards credit cards can carry interest rates up to 29.99% APR! You can check current average credit card rates online.
Get Debt-Free Faster
If you have to use credit or borrow money, your first priority should be to repay the balance as quickly as possible. Also, you want to do that without paying much in interest. Personal loans help make this possible, especially if you’re not always the best at managing your money.
With set repayment terms, a set amount of interest owed, and set monthly payments, personal loans are designed to help you repay the balance quicker. They’re a much cheaper alternative to high-interest store and bank credit cards.
Need help making a budget or a plan to pay off your credit card debt? We have financial coaches on staff waiting to help!
The convenience of credit cards makes them the go-to choice when paying for unexpected expenses. However, personal loans are a much smarter financial decision.
If you’d like to learn more about personal loans or would like to speak to us about applying, call, chat, text, or stop in! We’re here to help you make better financial decisions! (315) 671-4000, Monday-Friday, 9am-4pm EST.
Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.