Home » Personal Loans vs. Credit CardsPersonal loans are great if you’re looking for a lump sum of money to make a major purchase or for debt consolidation, with a set schedule for repayment. Credit cards are better if you’re looking to make daily purchases with a revolving line of credit. When you’re in a bind for cash or want to purchase a big-ticket item, it’s smart to compare personal loans vs credit cards.They both may seem like interchangeable payment methods but there are pros and cons to each method.Credit cards offer a line of credit that can be used to make purchases (up to your credit limit), transfer balances or get cash advances. Credit cards provide two main advantages: convenience and readily accessible funds in the event of an emergency. Credit cards allow you to conveniently purchase things in which you may not currently have the funds available.For example, you’re packing the car after a long weekend, you place your laptop on top of your car to free up your hands to help your friends load the heavier stuff into the vehicle first. You finish packing your car, jump in and take off down the road. Ten minutes down the road you remember you left your laptop on the roof of your car. It’s time to use your credit card! You generate enough income to cover the cost of a new laptop but don’t get paid for another two weeks and still have several deliverables due for work and school before then. It was time for an upgrade anyway. You can use the convenience of a credit card to purchase a new laptop, then use your next paycheck to completely pay off the charge.When emergencies happen, and you don’t have the funds to cover them, it could be stressful. Credit cards allow you to take care of emergencies as they come up.Pros of Credit CardsDifferent credit cards offer different benefits depending on how you use them and how often you use them. The pros of credit cards (compared to cash or debit cards) may be anything from building your credit, receiving rewards, fraud protection, or airline points towards future flights.Traveling Light: No need to search for an ATM machine. With the use of a credit card, you no longer need to tote around too much, or not enough cash during your vacation. Many places world-wide happily accept credit cards.Avoid Interest Charges: Some credit cards have introductory APRs of 0% for a set amount of time, meaning during that time, you won’t incur interest charges.Note: some credit cards offer deferred interest plans, meaning if you don’t pay your balance in full before the end of the promotional period, you may be charged the accrued interest!Cons of Credit CardsCons of credit cards can range from furthering your debt to ruining your credit with irresponsible usage.Spending too much: Don’t let those little pieces of plastic trick you into thinking you have more purchasing power than you can truly afford to pay back. You may be tempted to swipe more often, spending more money than you can pay off.High Interest and Hidden Fees: So, they got you in the door with 0% APR, huh? Or was it the chance to earn “points”? Whatever your credit card offers, when applying for a new credit card, be sure to read the fine print, including the list of fees and the annual percentage rates that apply after the promotional offer ends.Possibility of Ruining Your Credit: Misusing your credit card by charging too much without paying down the balance, or missing payment due dates could impact your credit score.What are Personal LoansThere are two different types of personal loans: secured and unsecured. Secured personal loans are backed by collateral, i.e.: title loans, mortgages. Unsecured loans don’t require collateral, instead, your information from your application, your credit report, including your credit score, are taken into consideration to determine loan eligibility.Unlike credit cards, personal loans are non-revolving credit, meaning once you’ve paid the loan off, the account is closed. Credit cards are considered revolving credit, which means when the debts are paid off, the line of credit is automatically renewed and ready to be used again – up to your credit limit.Pros of Personal LoansSecuring a personal loan is a great way to roll several bills into a single monthly payment. Personal loans allow you to pay down credit cards or other financial obligations. It’s less stressful keeping an eye on one basket of eggs instead of several.Personal loans are a great way to:Consolidate existing debtPay for major moving expensesRefinance your credit cardsStart on home improvement projectsPay for special occasionsHelp with adoptionCons of Personal LoansOne con of obtaining a personal loan is that you may increase your debt if you don’t manage your situation properly. Let’s say you obtain a personal loan to pay down your credit cards and consolidate your payments and voila, now you have your credit cards completely paid off! So, what’s the harm in charging just one item on a $0 balance credit card? Before you know it, you could be in more debt than before you secured the personal loan. Eyes on the prize!Be mindful of your debt, your monthly payments and what your initial goal was when starting the personal loan process. Keeping your credit cards at a $0 balance while paying off your personal loan is ideal if you don’t want to rack up more debt!Which is Better: Credit Card or Personal Loan?It’s best to start by comparing the benefits of personal loans vs credit cards by breaking down when it’s most appropriate to use them. Trust us – it matters.When it’s More Appropriate to Use A Personal LoanWe get it – the laptop of your dreams finally went on sale. It’s OK to use credit cards to finance short-term expenses like laptops that go on sale, a flat tire on the highway, or a birthday cake for Dave Jr. to mark his first birthday.When it’s More Appropriate to Use a Personal LoanAre you planning on redoing the basement this summer, or taking care of that leaky roof that’s slowly but surely turning your dining room into a swimming pool? It’s OK to use a personal loan to finance long-term expenses like home improvements, special occasions or credit card refinancing.Are there things you’re paying for with credit cards or personal loans that can be turned off, like monthly subscriptions, expensive cable packages, or weekly extravagant lunches? Dive into your budget and fine-tune it before trying to blanket it with a personal loan that could potentially become a bigger issue.Get Your Eggs in One BasketMaking the minimum payments on your high-rate credit cards just doesn’t make sense. It’s expensive and can drag on for years. Checking your rate with Best Egg could help you pay off your debt quicker or make fixed monthly payments more manageable. Not only can you save money in interest, but you can save time.