Finding the right credit solution can mean more flexibility, but the choice should also include a smart repayment plan. Let’s look at the difference between a credit card and a personal loan.
Credit cards offer convenient purchasing
Credit cards provide a convenient and secure way to pay for purchases, either in person or online. With a credit card, a payment is due each month, and you have the option of paying the full balance or paying less, down to the minimum due.
If you pay less than the full balance, you’ll pay interest on the balance you’re carrying, which accumulates with your other balances month to month. The more balance you carry, the higher your interest charges will be.
A personal loan can finance larger purchases
A personal loan is a secured loan, requiring collateral and approval by a banker. But personal loans offer access to larger sums of cash, which can be used for major expenses, like home renovations or car repairs. Personal loans are also offered with lower APRs than credit cards.
Which one works best for you?
To understand what’s best for you, ask yourself a few questions:
- How much do you need right now?
If you need a small amount, and your budget can handle it, a credit card might be an obvious choice. Try to avoid using your card for cash advances, because the interest charges are typically high. But if you can get what you need using your card, stick with it.
- How good is your credit?
With a healthy credit score, you might get a personal loan with a lower interest rate. If your credit score isn’t good, you might quality for a personal loan.
- How long will it take you to pay off the debt?
Regardless of your choice, the longer you take to pay off your debt, the more you’ll pay in interest charges. With a personal loan, you’ll likely enjoy a lower APR and have more time to pay it off.
Bright offers both
Bright automatically offers a personal loan to qualifying users. Bright typically recommends using it to pay off credit card debt, but you can also use it for larger purchases. No matter which debt tool you choose, plan for it with repayment in mind. Make sure you can afford the repayment plan, including fees and interest charges.