Should You Use Your Credit Card or Get a Loan?

Should You Use Your Credit Card Or Get A Loan
There comes a time when you need to make a purchase that you know is going to take some time to pay off. When that time comes, should you use your credit card or get a loan?

Should you use your credit card or get a loan?

When To Use A Credit Card

Credit cards are the better choice when making smaller purchases or consolidating smaller debts. Use them for purchases adding up to no more than a few thousand dollars that you feel you can easily repay within a year.

 

Pros

If you use a credit card with a low introductory rate on new purchases, you could end up paying very little interest on purchases for several months. Of course, you will need good credit to qualify for a credit card like this.

Many credit cards offer rewards just for buying things you normally buy like groceries, dining, gas and retail. Cards like these can  really help your savings if you make your payments on time. Just don’t forget to pay off your balance on time so you don’t lose your rewards to high interest or fall into debt.

Cons

Putting a big expense on a low-interest rate credit card might save you more money at the time, but it could hurt your credit score in the long run by increasing your credit utilization. Remember to try to use ideally around 10%, but no more than 30% of your credit line.

Credit card rates are variable, so the amount you are charged for keeling a balance on your card may change over time. If you have trouble keeping up with your monthly payments, this could mean serious trouble for your budget, and your credit score.

When To Use A Loan

Personal loans are the better option for larger purchases that will take you more than a year to repay. Also consider a loan if you feel you might be tempted to spend too much with a credit card’s open credit limit.

If you need to borrow an amount that is higher than your credit limit and that you know you will need more than 15 months to pay off, a personal loan is a better option.

Pros

Once you qualify for a personal loan, you get to choose a loan term and monthly payment amount that fits your budget. If you decide on a loan with no prepayment penalties, you can even pay ahead, if you’d like.

Many credit scoring models don’t view personal loans the same way as credit card accounts. If your personal loan is listed as an installment loan as opposed to revolving credit, it won’t be counted in your credit utilization ratio.

Cons

Applying for a personal loan counts as an inquiry into your credit. This will only lower your credit score by a few points, though. Avoid applying for several loans at the same time. Check your credit scores before you apply and try to pick a lender with credit requirements you will likely meet. You can ask potential lenders for the minimum credit score they require instead of putting in an application for a loan.

If you take out an unsecured loan, you could be hit with a high interest rate. Lenders do this to offset the risk of lending you money. If your budget is struggling, an unsecured loan is probably not the best option for you.

Do you need to make a purchase and are wondering should you use your credit card or get a loan? Give us a call at 1-866-991-4885.


No matter what your situation, Go Clean Credit has a solution. We have many credit repair programs that are available to help you overcome your credit situation and place you back on the path to financial success. Real credit restoration is not a once size fits all model and we tailor your needs to the right program, but most people can start for just $99 per month.

We have fixed price programs that get you back on track in as little as 5 months, debt resolution solutions, programs geared toward people who have had recent short sales or foreclosures and many others. Help is just a free phone call away, or you can fill out an appointment request. Contact Go Clean Credit to schedule a free consultation today.

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