When you are looking for ways to get access to extra cash, you won’t find a more affordable way to borrow than by taking out a credit card or personal loan. Both are unsecured forms of credit, making them more expensive than secured credit options. With a personal loan, you’ll be given a lump sum of money. A credit card is more unpredictable because the amount you pay on a monthly basis will depend on how much you spend.
Comparing credit card vs personal loan South Africa:
Credit cards are often a popular option and should ideally be reserved for times when you need immediate access to instant cash.
Credit cards offer more flexibility than personal loans. Offering a longer repayment period, credit cards offer a revolving line of credit. They can be ideal as a safety net when there is an unexpected emergency.
Owning a credit card may tempt some people to spend more money than they have. And that’s essentially where the trouble lies. It may lead to the trap of only paying the minimum repayment amount, when you should ideally pay your balance in full at the end of the month.
When you are approved for a personal loan, you have agreed to pay back the money within a specified period of time. With a personal loan, you cannot access the money you have paid back to the bank or lending institution. You may also have the option of being able to negotiate the interest rate.
Personal loans may be the better option if you’re looking for a bigger loan. They will also generally carry a lower interest rate and APR, compared to credit cards.
The verdict when it comes to comparing a credit card vs personal loan in South Africa:
If you’re looking for a short-term financial solution, a credit card may be in your best interest. A personal loan may come in handy when you want to make larger purchases, with a lower interest rate.