Personal Loans v Credit Cards

The two most commonly used personal credit options are personal loans and credit cards. They’re similar insofar as they give you an extra few thousand to play with and they’re also based on your credit history.

However, there are some important differences that are worth noting. Before you blindly jump into one or the other, take a few seconds to read this short article. You might be glad you did. Besides, I’ve spent weeks researching this stuff so you don’t have to – so you’ll know which category you fit into and which product is the right one for you.

Here we go…

Personal Loans

1. Traditional personal loan amounts start at around $3000 and go upwards – even up and over $100,000.

2. Personal loans usually have a lower interest rate for the life of the loan compared to credit cards – which makes them ideal for purchases of big ticket items (Think cars, boats, homes, or expensive family holidays).

3. Unlike credit cards, personal loans accrue interest immediately without any grace period. Most credit cards will give you 44 or 55 days interest free on purchases, so if you always pay off the balance in full it’s like free credit. Unfortunately, almost no one really does this.

4. Personal loans are repaid on a fixed schedule. So your loan might have a two year repayment term for example. Credit cards can drag on forever and ever, but most personal loans have a set repayment term.

5. With a lot of personal loans, you might pay extra charges if you want to pay more than the fixed monthly payment or you want to repay the whole loan early.

After taking all this into consideration and spending weeks researching, here’s my pick…

The Personal Loan Boss recommends the Aussie personal loan…

• Interest rates on their personal loans are fixed so you know exactly what you’ll be paying every month you have the loan.
• Low interest rates are between 13.69% and 14.55% depending on your financial situation and credit history.
• You set the term of the loan so you can afford your repayments.
• Fixed loan term so that you’re set to repay your debt and not let it drag on forever
• Apply in around 20 minutes. Get approved as fast as the next day.

If you want $3000 or more, my pick is the Aussie Personal Loan. It’s a responsible way to handle your big ticket needs. Don’t dither. Take my advice and apply now.

Credit Cards

1. Like personal loans, credit cards balances can also vary depending on your credit history and what you ask for. Credit cards are best for small purchases of less than a thousand or two – then you should really repay it if you’re using it responsibly. For example, it wouldn’t make sense to buy a car outright using a credit card. A traditional personal loan or car loan would be better suited for that purpose.

2. Credit cards operate as a “revolving line of credit” with no finite end date. So that means you can re use your credit limit again after you’ve repaid prior purchases. You can do this again and again, provided you’re below your credit limit at all times. The only deadline is your minimum monthly repayment.

3. Credit cards, in contrast to personal loans, usually offer an interest-free period (usually 44 or 55 days). During this time you can make purchases on your card without paying interest. Some credit cards give you repeating grace periods (where interest is not charged provided you repay your balance in full each month). This means you can save a lot compared to a personal loan if you are one of the few who has the discipline to operate this way.

4. Credit cards almost always charge higher interest in the long term compared with a personal loan. This includes credit cards nice low introductory rates for the honeymoon period. I think you should virtually ignore this as it only applies for a short time compared with how long you’ll have the card for. Your biggest expense will be the interest rate that applies for the life of the credit card.

So if you want a credit card, here’s the one…

I’ve compared the comparison sites. I’ve weighed up the important criteria and blown off the ones that don’t matter.

After all that work, I found the best card in the pack.

ANZ Card

• Low interest rate of 11.74% p.a. on purchases
• 0% p.a. on balance transfers for the first 6 months*
• Up to 55 days interest free credit on purchases
• $58 annual fee with up to 3 additional cardholders at no extra cost

Before choosing between a personal loan or credit card for your next purchase, think about your needs – and maybe revisit this site. Do you need to occasionally access extra cash? Then a credit card is the way to go. I’ve searched high and low and the ANZ one is my pick for sure.

If you want a big ticket item and you want a low interest rate, then run with a personal loan (the one from Aussie is the way ahead).

Neither one is the best, but once you know which one applies, I’ve give you the best option. Go for it and stop dithering.