There are two major types of credit – secured and unsecured. Most popular secured types of credit are car loans and mortgage loans. There aren’t too many alternatives if you need to buy a car and a house and you do not have enough cash.
The most commonly used types of unsecured credit are personal loans and credit card deals. Making the choice is not always easy. What are the main advantages and disadvantages of the two options? Let’s make a side by side comparison.
Question number one is always what are my chances of getting approved? Your approval for any kind of credit depends on your credit history. The bank will request your credit report and check your income and payment history for other loans.
If your credit score is low you shouldn’t count on getting approved for a personal loan. The bank wants to be sure that you will be able to pay back the money borrowed. A credit card is another story. There are many offers for those with low credit score and no credit history at all.
Go online, compare the deals and you will surely find something you are eligible for.
How much money can I get with a personal loan and with a credit card? The answer also depends on your credit score. However, loans generally allow you to receive more money. There is also the danger of going over your spending limit if you try to use all the credit you have on your plastic.
What is more expensive to have - credit cards or loans?If you have good credit history you will get good terms from your bank. A credit card deal might include 0% APR introductory period for up to 15 months. No bank will such terms for a loan. However, the interest rate for a loan is usually lower.
A good idea is to compare the terms of the loan with those of the credit card deal. Make sure you do not miss the fees for opening an account or maintenance fees. They will all add up and will make your credit more costly. And do not forget about penalty fees.
How much money will I have to pay every month? Your monthly payment depends on the terms and conditions and the amount of money borrowed. However, a credit card gives you an opportunity to make only minimum payments if you can not quickly pay off the balance. A credit card deal allows a more flexible payment schedule if compared to a personal loan. You can pay off the balance right away or make small payments every month.
What are additional bonuses? Credit card issuers offer a variety of reward programs. You can earn points, miles and redeem them for different bonuses, gift certificates, etc. You can also donate to charity or your favorite sports team. The biggest convenience of the loan is that it can be added to your bank account and you can use your debit card to make payments.
Compare the opportunities you have, consider your credit history and use the credit option that will suit your needs.
