Should You Get A Personal Loan Or A Credit Card Instead?
Find Out What The Advantages and Dis-Advantages Are
When you need some extra funds to use for your everyday needs, a personal loan can always help, and that's what our title loans basically are. But you might be facing a dilemma on whether to apply for a personal loan or a credit card because you're not sure which has a better advantage. They actually both have advantages and both can be used for the same thing, but there are differences as well that may have you preferring one over the other.
Similarities Of Credit Cards And Personal Loans
Credit cards and personal loans are usually both issued by banks, though there are peer-to-peer lenders as well who issue personal loans. Sometimes both have lines of credit that are drawn from to pay for expenses used by a card. Generally both need the applicant to have at least good credit or a good income to be approved, though there are a few credit card and personal loan options for those with poor credit. If your credit has really taken a hit, that's when a title loan may be what you want. But there are some differences as well between credit cards and personal loans.
Key Differences Between Credit Cards And Personal Loans
One of the main differences between credit cards and personal loans is the kind of payments you have to make on each. As Nerdwallet explains, credit cards tend to be for smaller expenses that are meant to be paid off monthly. Personal loans are meant for a big expense that you know will likely take a longer period to pay off such as buying a car, or the extreme example is buying a home though that's in a category of its own. Credit card bills can be carried over by paying the minimum amount each month, but you're going to end up paying quite a bit more in interest that way.
Most of the time credit cards are going to have a smaller line of credit than the cash amount issued with personal loans, though with some credit cards you could get very high credit limits if you have a high income or very good credit score. But you can usually expect a personal loan minimum to be for about $1,000 according to Money Under 30 and it's a fixed amount you're repaying unlike credit cards where your line of credit never disappears unless you've really become delinquent on them. Unfortunately unlike some credit cards, most personal loans don't have side benefits such as rewards or insurance coverage bonuses. But if you've found yourself struggling with debt and find it easier to pay it off in fixed installments, a personal loan is usually the ideal way to go.
Unsecured And Secured Personal Loans And Credit Cards
Credit cards and personal loans could be either secured or unsecured and each has its advantages and disadvantages. Secured personal loans and credit cards require some sort of collateral pledged to cover any losses resulting from borrower default. Unsecured credit cards and personal loans require no collateral and are generally issued on the basis of borrower credit score and income. Typically if a borrower defaults on these loans, a collections agency will handle the recovery.
Secured credit cards usually are secured by a cash deposit that will cover the initial credit line which will start out quite small. Secured personal loans will usually be covered by more expensive property such as a home or a vehicle. Secured credit cards and personal loans usually will be easier to be approved for because it has little to no credit checks. This is because the lender has much less risk to take with the borrower's assets covering the amount.
Car Title Loans Are A Special Kind Of Secured Loan
Car title loans are another kind of loan that can offer a bit of what both credit cards and personal loans offer. You can usually get approved for them much quicker than regular personal loans and sometimes even quicker than credit cards. But they can be as high as personal loan amounts though like credit cards, it's a good idea to pay them off at the end of the month.
How easy is a title loan application to complete? If you own your vehicle, have the title and have income, you can usually expect instant approval. If you do still owe money on your vehicle, you might be able to apply for 2nd lien title loans. If you neither qualify for a credit card or personal loan, title loans should be a consideration.