When you need an urgent cash flow, two main options occur: borrowing the amount you need with a personal loan or credit card cash withdraw.
Choosing which one is best for your situation requires further research, comparison and shopping among the lenders. You need to base your decision on your financial needs, current financial situation, your repayment ability, the fees and time frame. If you want to receive some amount of money to consolidate debt or to cover your expenses, while trying to decide which option suits your needs better for you situation, you need to consider several factors before choosing one.
Personal Loans are issued by banks, credit unions and private lenders and can be used for many purposes including debt consolidation, emergency expenses, home improvements, weddings, holidays, etc. The terms and the interest rate you will be based on the loan amount, loan duration and your financial profile. The lenders checks your credit score and performs an inquiry on your credit report to assess the risk and decide whether you qualify for a personal loan.
How To Decide Which One Suits You Better
You need to consider several factors before choosing one of them.
- The loan amount you need: If you need to borrow a small amount you may want to apply for a credit card cash since paying off a smaller amount usually lasts less.
- Loan duration: You nd to compare these options by using a loan repayment calculator to see whether loan duration causes you to save or loose money.
- Credit Score: If you have an excellent credit score, you may be charged lower interest rates for a personal loan.
- Additional fees: You need to understand and calculate additional payments before applying.
Credit Card Cash vs Personal Loan
- Documentation: Personal loan requires you to upload many documents during application while credit card requires you to provide less documentation.
- Application: Being approved for a personal loan takes a few days but being approved for a credit card is quicker.
- Interest: Unsecured personal loans usually come up with 13-22% interest rates while interest rates of credit cards generally range between 10-18%. But, you should remember interest rates of personal loans can be reduced while interest rates of credit cards are mainly fixed.
- Unsecured: Both of these loans do not require you to pledge an asset as collateral.
- Tenure: Personal Loans are long duration loans and can take a few years to repay while credit cards usually have lower tenure periods.
- Amount: Personal Loans allow you to borrow huge amounts while credit cards are better for borrowing smaller amounts.
- Promotional Period: Personal loans do not contain a promotional period in which you are allowed to pay off 0% p.a on balance transfer for a few months while some credit cards do.