A credit card or a loan? (Part II)

In the previous part of this article we have discussed some pros and cons of the credit cards. This chapter will include, accordingly, advantages and disadvantages of loans. It will allow us to make some comparison with both of them.

So, let’s start with pros. The amount of money, which is available for you if you get a loan, is much bigger, than if you get a credit card. So that you can afford more, paying pretty low rates (equal to 3% or so). Another great advantage of loans is an opportunity to customize your payments’ schedule. For example, borrowing a big sum, you can spread your repayments for longer term. It gives you a flexibility, which is absent in case with credit cards. Besides, you will definitely know, how much you are still left to repay, in order to get rid of your debts without problems.

However, loans have some certain cons as well. For example, small sums can be borrowed only with higher rates (around 7% or so). According to this fact, you’d better use credit cards, if you need small sums of money for shopping. Another con is high fees, set by the bank. They can be charged, for example, if you want to pay off the loan earlier, than you had to. In most cases, the bank will charge some penalty, equivalent to couple of monthly interests.

In conclusion, we can admit, that either credit cards or loans are powerful financial tools, but they are different either in their purposes, or in their requirements and opportunities.