Many people are used to placing large or unexpected expenses on their credit card. Of course, if you can’t repay the entire balance when the next card payment is due, you could end up having to pay a significant amount of interest.
If you’re not able to repay the balance for a number of months or even years, you can end up owing the credit card company far more than you originally charged to the card.
A better option if you need a large amount of money may be to get a personal loan. You repay the loan in installments over a designated period of time. With an installment loan like this, depending on the terms that your credit score qualifies you for, you may end up paying significantly less in interest.
Following are some expenses for which a personal loan might be the preferred option:
- Health care expenses not covered by your insurance, including significant dental expenses such as braces and other types of orthodontic treatments
- Consolidation of credit card debt
- Home improvement projects (You may also consider getting a home equity line of credit, or HELOC, which is based on the equity that’s available in your home.)
- Business start-up costs
- Wedding expenses
Of course, credit cards can have their advantages. You may have your eye on a couple of business class seats to Europe that a large purchase using your airline rewards card will lead to. However, if you’re not going to be able to repay quickly the amount you charged, the trade-off may not be worthwhile.
If you get a personal loan to consolidate your credit card and other debt, it may feel better to have that debt in one place. However, it’s still there. If you find yourself having a difficult time getting your debt under control, you may want to seek experienced legal guidance to find out what your options are.
Source: Huffington Post, “When Is A Personal Loan Better Than A Credit Card?” Oct. 23, 2017