Personal loans and credit cards both offer a way to borrow money for any purpose you choose. While they share many of the same features, there also are important differences, such as wha🔥t they cost and how they need to be repaid.

Getting Approvꦐed for a Personal Loan or Credit Card🀅

Banks, credit card companies, and other lenders will look at a number of factors when deciding whether to approve you for credit. Your 澳洲幸运5开奖号码历史查询:credit score is among the most important ones. It is based on your past credit history, including your record of on-time payments, how much debt already have outstanding, and whether you've ever defaulted on a loan.

The 澳洲幸运5开奖号码历史查询:three major U.S. credit bureaus—Equifax, Experian, and TransUnion—compile 澳洲幸运5开奖号码历史查询:credit reports on individual borrowers, which are then used to calculate their credit scor🦹es.

Credit reports do not include any information about your income, so lenders will typically ask you about that separately in your loan or credit card application. They may use it to calculate your 澳洲幸运5开奖号码历史查询:debt-to-income ratio (DTI), which can be another important factor in thei𓆉r decision.

Personal Loans

With a personal loan, lenders provide you with a lump sum of money that you repay over time, typically with fixed monthly payments. This is known as an installment loan. A personal loan will have a fixed term as well, often of a few years, but sometimes longer or shorter.

Personal loans do not offer ongoing access to funds like a credit card does, but they usually have 澳洲幸运5开奖号码历史查询:lower interest rates, especial🔴ly for borrowers with a good to high credit score.

A personal loan can be used for any purpose. For example, you can use it to buy new appliances, consolidate credit card debt, 澳洲幸运5开奖号码历史查询:repair or upgrade your home, or pay for a vacation. Personal loans are typically 澳洲幸运5开奖号码历史查询:unsecured, meaning they are not backed by 澳洲幸运5开奖号码历史查询:collateral. Secur🌌ed perso📖nal loans can be available, as well.

Personal loans often charge an 澳洲幸运5开奖号码历史查询:origination fee and may෴ have other fees as well. This can add to their total cost.

How Do People Use Personal Loans?

In 2023, hxmklzzmallshg.commissioned 澳洲幸运5开奖号码历史查询:a national survey of 962 U.S. adults who had taken out a personal loan to learn how they used their loan proceeds or might use a loan in the future. 澳洲幸运5开奖号码历史查询:Debt consolidation was the most common reason people borrowed money, followed by home improvements and other large expenditures.

Credit Cards

Instead of a lump sum of cash, credit cards offer 澳洲幸运5开奖号码历史查询:revolving credit, providing borrowers with oℱngoing access t𓃲o funds that they can draw on as needed, up to an agreed-upon credit limit. As they charge purchases to their card, their available credit goes down. As they repay, it goes up again. This can go on indefinitely.

Unlike a personal loan, with a credit card, you pay interest only on the funds you use. And if your credit card has a 澳洲幸运5开奖号码历史查询:grace period, as cards typically do for new purchases (but not 澳洲幸运5开奖号码历史查询:cash advances), you can avoid paying any interest at all if you pay your balance in fulღl each month.

Also, unlike personal loans, where your monthly payment is usually the same over the entire repayment period, your credit card bill can vary each month depending on any new charges and any leftover balance from previous months. You will be expected to make at least a minimum payment each month, but if that's all you pay, your balance can grow quickly, accruing interest all the while.

Many credit cards offer benefits like cash rewards or a 0% introductory period. However, if you run a balance, they typically have much higher interest rates than personal loans. And some have monthly or 澳洲幸运5开奖号码历史查询:annual fees.

Other Types of Credit for Consumers

Personal loans and credit cards areꦅ just two ways🍌 to borrow money if you need to. Here are some alternatives that may be more appropriate in some situations:

• Home equity loans and home equity lines of credit (HELOCs). If you own a home with sufficient equity accumulated in it, you may be eligible for a home equity loan or HELOC. The first comes in the form of a lump sum loan, the second as a credit line that you can draw on as needed. Both tend to have relatively low interest rates, but because you're putting your home up as collateral, you could lose it if you're unable to repay.
• Personal lines of credit. A personal line of credit offers revolving credit like a credit card. You can access funds at any time as long as you don't exceed your 澳洲幸运5开奖号码历史查询:credit limit.
• Payday alternative loans (PALs). Traditional 澳洲幸运5开奖号码历史查询:payday loans are small, short-term loans with very high interest rates. They are often considered a form of 澳洲幸运5开奖号码历史查询:predatory lending and are outlawed in a number of states. Some banks and credit unions now offer what they call payday alternative loans, typically in amounts of $200 to $1,000, with more reasonable rates.
  
  

The Bottom Line

Both personal loans and credit cards make it relatively easy to borrow money when you need it—and to get into credit trouble if you aren't able to repay what you owe. In deciding between the two, you'll want to compare their interest rates, fees, and other details. Whichever you opt for, be sure to shop around, as lenders' terms can vary, even for the very same financial products.