Personal Loan Vs Credit Card: The Big Holiday Conundrum

Personal Loan Vs Credit Card

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The holiday season is here but there is one thing missing- money! Well, maybe you listened to us earlier this year and tried these 11 money saving ideas but you are yet to reach your budget. Maybe the money you set aside for this year’s holiday will not be enough and you are weighing between a personal loan vs credit card to finance your holiday expenses.

We all know that this is the season of spending. From holiday gifts to vacations that we have dreamt of all year round. Not forgetting numerous meals with loved ones, holiday décor, and having money for emergencies. What a bad time to be broke!

If for some reason you do not see yourself managing to save enough, then a personal loan may be the best option for you. Think of it more like a “holiday loan”, just a means to meet your holiday needs.

Below are some of the reasons why getting a personal loan for this holiday is better than using your credit card.

Limited Spending

With a personal loan for your holiday expenses, one thing is certain- you cannot spend more than you have borrowed!

With a personal loan, you are well aware of the amount of money you have. This, of course, makes it easier for you to budget and plan yourself. Better still, you do not have to spend all the money, meaning whatever is left at the end of the holidays can be used to repay the loan.

With Lendvious, you can get different personal loans for vacations or major purchases among others. Another place to consider is Freedom Plus, which gives you an option to repay in a single monthly payment and choosing your repayment date. So, if you are sure you will get some cash after the holidays, there goes one of your choices of a personal loan lender.

A credit card, on the other hand, is very tricky especially if you are a spendthrift. The limit you can get from one card or a number of cards financing your holiday expenses might be higher than what a lender is willing to extend to you as a personal loan. This limit gives you an opportunity to spend without as many limitations.

Swiping that card in every store that tickles your fancy is fun but the minute you start repaying your credit card debt you might not be smiling that much. The interest rate you will get from a personal loan will likely be less than the interest rate you get from credit cards.

Additionally, credit cards often offer you cash in advance, a deal that actually sounds sweet. Compared to the personal loan option, you will still get a higher APR and pay extra fees with a credit card cash advance.

Read more: What Everybody Ought To Know About Credit Card Cash Advance

Lower Interest Rates

As mentioned above, personal loan interests are usually lower than the rates you will get from your credit card provider. For example, credit cards have an APR of 13.74%-29.99% depending on your credit score and the credit card provider.

Online lenders have simplified the process of getting personal loans. They have also brought along lower APR’s compared to traditional lenders such as banks. In case you are having trouble choosing a personal loan lender, Cash Advance will connect you with a suitable lender.

That said, with personal loans, you could get a much lower APR, say 00%- 28% on average. Best Egg, for example, has an APR of 5.99% to 29.99%on average, for different personal loan options. If you have a great credit score, you might get a lower APR. On most occasions, however, the rates on a personal loan are usually lower than those of credit cards.

A lower APR means saving more when it comes to repayment. If you use your credit card this holiday and the interest is very high, it means you will owe more money when you start repaying your credit card debt compared to if you took a personal loan.

Fixed Payment Terms

I do not know about you but I am always at ease when I know how much I will be spending in a month. This, of course, calls for budgeting and planning yourself in advance.

If you take a personal loan this holiday, you can be at ease when it comes to repayment because the repayment terms and the interest amount will not change. They remain fixed, even if your repayment period is 12 months or more. This makes it easier for you when you are planning your budget every month.

With credit cards, the repayment amount is usually higher because the accrued interest comes with other additional fees. Some credit cards might give you a 0.00% APR for a few months, a deal that is only good if you can repay the whole amount within that given period. It can also get a little bit confusing if you do not pay your credit card balance in full every month. The repayment amounts for the following months together with the charges will be higher than usual due to the previous balance. If you do not know how to go about such scenarios, then you will find yourself getting behind with your repayment.

Unless you are getting the 0% APR and you are sure of repaying the full amount within that grace period, then a personal loan may be the better option. It will help you manage your holiday expenses as well as making the repayment period manageable and well planned.

A Fixed Repayment End Date

Who does not like knowing when they will finally put an end to debt repayment? I know I do, just like most people. It is the most relieving financial experience, really. And it very exciting to say the least.

This is what a personal loan offers you- a fixed repayment end date. Remember what we said about fixed terms? Yes, that comes with a guaranteed end date, assuming that you will be up-to date with all the monthly repayment schedules.

Say, for example, you took a personal loan with OppLoans, you will get a repayment period of up to 36 months. This will depend on how much money you borrow as well as your credit score. If you get 12 months, you know by this time next year you will be done repaying that debt.

Credit cards, on the other hand, require you to pay a certain minimum amount on every statement period. What that means is that you are not certain on when you will finish repaying off this debt if you are not paying it off in full. It also means that your card will be accruing interest indefinitely. That, of course, is expensive.

Personal Loan Vs Credit Card: Which is Better for Holiday Expenses

As much as saving for your holiday expenses is the better option, we understand that things can change along the way. Since the holiday season is already here, there is no need to get yourself worked up trying to figure out how to finance that vacation or holiday gift expenses.

Get a personal loan because it has a fixed end date and comes with fixed terms and interest rate. This will make it easy for you when you start budgeting and managing your funds. You are also assured of the end date for repaying that loan. Additionally, the rate you get from a personal loan will, more often than not, be lower than what a credit card provider may offer.

Hopefully, come next year, you can start saving for your holiday expenses early enough.

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