While personal loans are one of the most common and practical ways to cover large expenses, we’re often tempted to turn toward the ease and convenience—and perceived rewards—of credit cards instead. However, there are some cases in which a personal loan is not only the better choice, but it may also be the one that saves you more money—even when factoring in all those credit card “perks.”
Compared to most credit cards and other borrowing options, personal loans typically offer lower interest rates, more affordable repayment terms, and the flexibility you need. Consider these common scenarios where a personal loan can often do more for your bottom line in the long run:
Cover a Large Unexpected Expense
Whether it’s a major car repair, sizable medical bill, or even new furniture, a personal loan tends to be the cheapest financing option that still allows you to keep your repayment manageable.
Since a personal loan, on average, offers a lower interest rate than that of a credit card, you’ll be able to evenly spread the expense over a multi-year period with an affordable monthly payment amount. Not only will this help save you money in the long run, but having that peace of mind can help make dealing with the stress of an unexpected expense that much easier to handle.
Complete a Home Renovation or Repair
Being a homeowner is one of the greatest financial investments you can make, so it only makes sense that you want to protect and preserve such an asset. A personal loan can be a great financial resource to cover a major home repair or complete a renovation project. This is especially true for individuals who want to make a home improvement but may not have enough equity built up in their home to qualify for a home equity loan.
Even if a home equity loan is an option for you, a personal loan may still be the better choice. Because personal loans are classified as unsecured loans, you won’t have to worry about having a home appraisal conducted first in order to receive funds. This means you can spend less time waiting for approval and more time focusing on your project. Plus, you won’t have to put your house on the line as collateral.
Fund a Personal Experience
Your best friend just announced their plans for a destination wedding, and while you wouldn’t dream of missing their big day, you can’t help but sigh knowing your savings account is less than equipped to fund a trip right now, especially one at a luxury tropical resort.
While you may be tempted to break out your credit card and charge the trip anyway, consider this: unless you’re able to pay your credit card balance in full when your next statement arrives, you’ll continue to accrue interest on your account. Given that most credit cards carry an interest rate of 19.02%, you could find yourself ultimately paying much more than the original cost of your trip.
Using a personal loan, while it may seem less convenient on the surface, is worth the extra effort. Not only can you easily cover the expense of your trip with a personal loan, but with an average interest rate of 9.41%, your overall cost would be significantly lower than if you had used a credit card. Now that’s something to celebrate!
Pay Off Debt
If you already carry a significant amount in credit card balances month-to-month, consolidating your debt using a personal loan is one financial planning approach that is sure to save you big!
How does it work? Let’s say you have a credit card with a current balance of $10,000. Using the funds you receive from a personal loan to pay off your balance in full allows you to eliminate a higher-interest payment instantly. You’ll still have your personal loan to repay, but it will be at a much lower interest rate than your previous credit card balance. This translates to a more manageable monthly payment. Combine that with an established timeline for your loan repayment, and you’ve got a clear roadmap for financial success.
Whatever your reason for a personal loan may be, Credit Direct can help! With personal loans available up to $40,000, our loan agents can guide you to the right solution for your financial needs. Our application takes just minutes to complete and won’t affect your credit score. Apply online to check offers now!