For non-urgent fund needs, apply for Personal Loans instead of Credit Cards

by Gopal Gidwani on April 20, 2017 · 0 comments

in Financial Planning

Credit card and personal loan

People generally have 2 types of fund requirements – large and small. Within this categorisation, the need can be urgent or non-urgent.

Now the case for urgent fund needs is such that doing plain mathematics won’t work. You need to get your hands on money and get it as soon as possible. You might even be willing to sell some of your assets if the need is critical in addition to urgent.

But the case of non-urgent fund requirements is different. There is no real emergency to get the funds. You have ‘some’ time at hand to arrange the money.

Now the best option in any case is not to borrow. Why pay interest to anyone? But what if you don’t have the money yourself or can’t take help from family and friends? Then it boils down to taking some financial help.

Within the unsecured category, the two convenient options are personal loans and credit cards. The biggest difference is the rate of interest charged. While personal loans costs about 15-20%, the credit cards can charge even more than 40%. So it’s a no-brainer that personal loans are cheaper than credit cards.

But many people are so comfortable with the convenience offered by credit cards that they overlook the cost of borrowing for ease of borrowing. The result is disastrous. They end up paying extremely high rate of interest for the outstanding amount.

In any case, the credit limit of your credit cards is pre-decided. So if the fund requirement is large, then credit cards won’t serve the purpose. Your only option is to take a personal loan.

So if you are planning to take some financial help in near future, do not get swayed away by the convenience of credit cards. They are extremely costly. Your best bet would be to take a personal loan.

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