When most people get in trouble and don’t have the cash they need, they turn to credit cards to get them through. While credit cards are certainly a helpful option and can actually be very good for your financial future, they aren’t the only option when you don’t have money to pay your bills and buy the things you need for you and your family.
Personal loans are another option that you likely have at your disposal when you’re strapped for cash. They work differently than credit cards, and unlike credit cards, most people aren’t too familiar with them.
Which one is better when you’re short on cash? Use our guide to help you decide which option you should take the next time you need a little help.
Personal loans are basically unsecured loans that you get from the bank to help you pay for anything you need. You could be financing a once in a lifetime trip or you could be simply trying to keep your family afloat.
When you choose to get a personal loan, you do so often without collateral based on your credit score. In these cases, you’re probably looking at an interest rate of around 11%, at least in 2015 and in the next few years as well.
While that seems like a lot, it isn’t always such a bad option when you compare that to the interest rate of credit cards. However, unlike credit cards, paying back a personal loan won’t help build your credit score and leverage your financial power for future purchases.
Credit card interest rates can be considerably higher than those that come with personal loans, but they do have one benefit. Most credit cards don’t charge interest right away – they do it after 30 days have passed.
If you’re paying off a purchase in 30 days or less, or you can pay a portion of the balance, credit cards are often a better choice. When you can’t pay right away, getting a personal loan is ideal.