Why choose a personal loan instead of a credit card?
If you are looking for a small cash loan between $500 and $10,000, you basically have two options; either choose a personal loan or opt for a credit card.
At Fair Go Finance we recommend a personal loan every time. Why? Here are 5 convincing reasons.
1. Personal loans have an end date and are simple to understand
Do you really want a small debt to stay with you FOREVER. This is a real risk when you get a credit card, because you can pay it down, but then redraw it up again.
For people who struggle to budget, credit cards are too tempting to use. On the other hand, if you take out a personal loan you simply pay it off, meaning it will eventually be repaid and closed.
2. Credit cards are confusing
When you get a credit card there are many terms and conditions you need to understand. Statement date, statement period, statement due date, credit limit, available balance, payment due date, purchase interest rate, balance transfer interest rate, cash advance, interest free period – the list is exhausting.
Everyone is naturally drawn to the idea of “interest free” periods but many of us get caught out when we can’t make the full payment. This consequently means you start paying interest. With credit cards it’s easy to keep spending, something that is just not possible with a personal loan.
3. A Fair Go Finance personal loan customer can receive great benefits
At Fair Go Finance, if you take out a loan with us and keep timely payments, you will be eligible for our Mates Rates Loyalty Rewards Program. Not only does this mean you’re eligible for lower interest rates but you’ll also receive further discounts on your application fee.
4. Credit cards get stolen
Sadly, many of us know how upsetting it is to have your wallet stolen. If your credit card is stolen it means phone calls to the bank, cancelling accounts, re-organising direct debits and re-establishing payment arrangements.
So if you need a small loan, opting for a personal loan not only keeps you on track with regular payments, but it just can’t get stolen.
5. Credit cards can get out of hand – watch out for cash advances
Because credit cards are easy to use, people can easily pile extra purchases or cash advances onto their card.
By deciding to take “cash” out of your credit card (a cash advance) you not only pay interest on it straight away but you also may get charged a fee for the privilege. Suddenly, the interest and fees can start mounting up and before you know it, even the minimum balance can become hard to pay.
If your credit card repayments aren’t met, your credit report will be updated indicating you’ve not paid it on time, ultimately giving you “bad credit”.
Personal loans are designed so you get a lump sum payment into your bank account, and from that point on, you cannot draw any more but simply need to make regular set payments until the loan is paid off.
It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.
Check your options before you borrow:
For more information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor.