When considering borrowing options, personal loans offer several advantages over credit card loans. Here are the main benefits of choosing a personal loan:
Personal loan over a credit card loan
1. Lower Interest Rates
Personal Loans: Generally offer lower interest rates compared to credit card loans, typically ranging from 10.49% to 22% APR. This can lead to significant savings over the loan term.
Credit Card Loans: Often have higher interest rates, sometimes exceeding 15% APR, and interest is calculated on the initial loan amount for the entire duration.
2. Structured Repayment Terms
Personal Loans: Provide fixed monthly payments (EMIs) over a set period, usually between one to five years. This predictability helps with budgeting and financial planning.
Credit Card Loans: Typically have shorter repayment tenures and may not offer the same level of structured repayment as personal loans.
3. Higher Borrowing Limits
Personal Loans: Suitable for larger amounts, making them ideal for significant expenses like home renovations, medical bills, or debt consolidation.35.
Credit Card Loans: Limited to the available credit card balance, which may not be sufficient for larger purchases.
4. Credit Score Benefits
Personal Loans: Paying off personal loans can improve your credit score over time, as it demonstrates responsible borrowing and repayment behaviour.
Credit Cards: While responsible use can also boost credit scores, maxing out cards can negatively impact them.
5. Flexibility in Use
Personal Loans: Funds are disbursed directly to your bank account, allowing you to use them for any purpose, including paying merchants who do not accept credit cards.
Credit Card Loans: Funds are typically used directly for purchases or cash advances, limiting their flexibility.
Conclusion
Personal loans are advantageous for those needing substantial funds with structured repayment plans and potentially lower interest rates. They are ideal for large, planned expenses and can help improve credit scores through timely repayments.
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