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13 Jan
Personal Loans vs Credit Cards

Personal Loans vs Credit Cards

It’s always better to pay cash for large purchases, however, there are plenty of occasions when it is just not possible. Life gets in the way, and sometimes ongoing expenses mean it’s difficult to save for time-sensitive purchases. If you are planning to buy a car, take a holiday or undertake studies, borrowing money may be your only option.

In this article, we discuss the differences between personal loans and credit cards and the pros and cons of each. Please note the information in this article is general advice only and should not be considered as a personal recommendation.

What is the difference between a personal loan and a credit card?

A personal loan is a loan that you can use for any personal expenses, including car purchase, travel, education, medical expenses, home improvements or even debt consolidation. It is usually unsecured, however some lenders (like My Cash Online) offer the option to secure against assets such as a car or savings in order to obtain a lower interest rate. Personal loans usually have a fixed rate and set repayment amount over a fixed term. At My Cash Online, we offer personal loans with a term of up to 24 months.


A credit card, on the other hand, is a revolving debt facility. There is a set limit that you can use as often as you like, and if you don’t pay the entire spendings off at the end of the month you will carry a balance against the card. This means that although you are paying interest against a debt, you can continue to make purchases up to the approved limit.


When is a credit card better than a personal loan?

A credit card is very rarely a better option than a personal loan. There is plenty of misinformation that having a credit card helps build your credit rating, however this is applicable in the US only. In Australia, there is no positive impact on your credit rating by holding a credit card in positive standing compared to no credit card at all. However, credit cards may be a good option for those who are able to pay off the balance in full every month and wish to collect rewards points as part of a card partnership program.


The danger with credit cards is that you can always charge more to the card up until you reach the limit, keeping you stuck in a debt cycle. With a personal loan, you know exactly when your balance will be repaid, and as long as your repayment history is good you can often borrow more money from the same lender without completing another application.


When is a personal loan better than a credit card?

If you are looking to make a large purchase that you can repay over time, a personal loan is the way to go. With My Cash Online, your funds will be released quickly and in one lump sum, which you can then pay back in weekly, fortnightly or monthly instalments for a set period. You will be able to budget your set repayments every month and know exactly when the loan will be paid in full.


If you are in need of quick cash for personal expenses, apply for a fast personal loan with My Cash Online today.

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