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Credit Cards vs. Personal Loans

Credit Cards vs. Personal Loans

Compare the pros and cons of each to determine which is right for you.

Credit Cards vs. Personal Loans: What’s Right for You?

Sometimes you need to borrow money to ride out a financial emergency. To get the flexible financing you need, you may look to credit cards and personal loans to help. But how do you know which one is right for you and your needs?

Credit Cards

You likely already have experience using a credit card. It’s the most common line of credit, a type of financing that lets you borrow money as needed, up to an allowed amount. As you repay the balance, including interest, those funds become available for use again. Credit cards are a great choice when you plan to:

  • Make small, spread-out purchases. Credit card funds can be accessed as you need them, so long as you don’t hit your credit limit. So if your expenses are small and scattered, you can borrow money as needed with a credit card.
  • Consolidate a smaller amount of debt. If you’re looking to ease the load of multiple higher-rate credit card balances, consolidating the debt and transferring it to one lower- rate card may help. Some credit cards may have a balance transfer fee, but many do not. In contrast, personal loans may carry origination and closing fees. When evaluating your options, consider any fees you may incur in addition to the interest rate.
  • Have flexibility with repayment. Minimum payments must be made each month on your credit card balance. But you aren’t required to pay off your entire balance by a certain date. However, interest generally continues to accrue on the remaining balance.

Personal Loans

Personal loans function similarly to auto loans. You borrow a lump sum from a lender, and then you make fixed monthly payments that have been calculated to pay off the entire balance within a certain timeframe. A personal loan might be right for you if you plan to:

  • Fund a large expense. Many credit cards come with a credit limit of $5,000. If you need to borrow more money, you’ll likely need a personal loan. You can also use a personal loan to consolidate a large amount of high-interest debt, so you only have one fixed monthly payment.
  • Make the same payment monthly. The minimum required payment for a credit card usually varies from month to month. If you want to depend on a consistent monthly payment amount that you can integrate into your budget, then a personal loan may be the better fit.
  • Limit your ability to spend. Credit cards allow for a lot of open-ended spending. In contrast, the funds from a personal loan are issued upfront in the amount you need. If you have trouble with overspending, a personal loan can help make sure you’re focused with how you spend.  

Getting You Back on Your Feet

Both credit cards and personal loans let you borrow money for almost any of your needs. You can explore the rates and features of DCU credit cards and personal loans online.

Please note that membership is required to open a DCU Visa® Platinum Credit Card and to accept a DCU Personal Loan.
 
This article is for informational purposes only. It is not intended to serve as legal, financial, investment or tax advice or indicate that a specific DCU product or service is right for you. For specific advice about your unique circumstances, you may wish to consult a financial professional.