In these times, the financial tools we have at our disposal are varied. However, being so many and at the same time similar, it could be confusing to choose the most suitable for our needs. For example, what would you choose between credit cards or personal loans? What are their advantages?
They are two tools that many people confuse. If you do not know what your best option would be, do not worry, then we will break down all the information you need to know to make the best financial decision.
Let’s start with the definitions
What are personal credits?
A personal credit has as its main characteristic that it is an amount of cash that a banking institution can lend you. They give the opportunity to choose the term to pay. The amount requested is evaluated to see if it matches the creditor’s ability to pay, includes an interest rate. It can be renewed once it is fully liquidated.
- You get the amount in cash.
- Payments can be made between 6, 12, 24, 36, 48 or up to 60 months *.
- Fixed payments.
- It is a long term commitment.
- In some cases there are commissions for advance payments or credit cancellation.
- You cannot renew the credit until you finish paying it.
And the credit cards?
It is a plastic issued by banks and containing a credit line to use, it is not used for cash withdrawals (although it can be). They usually offer other benefits such as discounts, points for each purchase. It is a revolving credit, that is, as you pay that same amount becomes available credit.
- You can use the credit card or have cash.
- You can make monthly purchases without interest.
- It offers you other benefits such as miles for trips, discounts, preferences, etc.
- You are exposed to risks such as cloning your card or fraud.
- You have access to purchases, so you could spend on mere impulse.
- They cost, either the annuity, minimum expense, commissions for non-payment, etc.
When to use a personal credit or a credit card?
Credit cards are used for immediate and personal use purchases. They can even become a tool for small businesses that do not require such large expenses.
In contrast, personal loans are recommended for projects or goods of much greater value.
Tips for choosing …
- Always compare how much it will cost you to use a credit card or apply for a personal loan.
- Focus on your goals, this way you can decide which is the best option for you.
- Stay on top of your payments, remember that either product has an impact on your credit history.
- Think about how long you will finish liquidating the money.