Financial products such as personal loans and credit cards can provide you with many opportunities for your financial growth. To know which one to choose and the ways in which you can increase your chance of getting approved for these financial products, you must understand the difference between them.
Sean Martin D. Plantado, head of customer service for Digido.ph, recommends finding the right card that fits your lifestyle, clarifying its benefits, and applying online.
The most noticeable distinction between an atm salary loan for teachers and a credit card is that one comes in the form of a physical card, whereas the other comes in the form of a check. Personal loans and credit cards are similar in terms of unsecured loans that are not secured by collateral pledged by the borrower. Also, providers only expect you to pay them with interest on a specific date. This also means that applying for personal loans and credit cards can be time-consuming. Banks and other financial institutions always make sure that borrowers meet specific criteria in order to be approved for their products.
Within the personal loan category, lenders provide a variety of options that can affect credit terms. Personal loans, unlike credit cards, do not provide ongoing access to funds. A borrower receives a lump sum upfront and has a set schedule to repay the loan. This kind of arrangement comes with lower interest for borrowers who have good or high credit scores. The benefits of applying for this type of loan include the fact that they are generally best for large purchases such as homes or cars, have a lower interest rate than a credit card, and provide funds in one lump sum.
When to apply for a personal loan?
Personal loans, depending on your disposable income, typically offer a higher loanable amount than credit card limits. Apply for a personal loan when you need cash quickly for large projects such as downpayment for a new vehicle, home renovation, or debt consolidation. Personal loans have a lower monthly add-on interest rate as compared to credit cards.
Credit cards are classified as revolving credit, which is a type of borrowing. As long as the account is in good standing, a revolving credit account typically provides the borrower with ongoing access to funds. Increases in credit limits on revolving credit card accounts are also possible on a regular basis. Personal loans typically have higher interest rates, but borrowers only pay interest on funds used so that a borrower may have an open account with no interest if there is no balance.
Credit cards provide numerous benefits. The best credit cards may offer 0% introductory interest periods, balance transfer options, and rewards. Generally, all credit cards can be used where electronic payments are accepted. They can be unsecured or secured in general. Unsecured credit cards provide credit with no collateral which is frequently opted for by borrowers with poor credit. While a secured credit card requires the borrower to contribute capital toward the card’s balance limit.
High-quality cards with rewards points can be extremely beneficial for borrowers who take advantage of the perks and pay off their balances on a monthly basis. Reward cards offer points and rebates for discounts on purchases, bill payments, and travel. The benefits of applying for a credit card are being more accessible and having an ongoing revolving credit balance that only charges interest when funds are used. Credit cards can be a viable alternative to personal loans because they can be obtained with 0% interest and may include grace periods. Other benefits include convenience and reward points. However, as with any credit borrowing, interest and fees can be a significant burden. Despite the advantages, the interest rates are typically higher than on personal loans, and each credit card will have its own method of accumulating interest, so it is critical to read the fine print and always check your credit balance. Overall, financing with a credit card may appear to be a simple option on the surface, but as with any borrowing, it is critical to do your homework.
If you are still thinking if you are going for a personal loan or a credit card, just remember to consider the purpose of applying for this type of financial product and read their terms and conditions carefully. Once you understand both types, you will definitely make up your mind.