Personal Loans vs. Credit Cards

Far too often, many of us reach for a credit card when the unexpected happens. While credit cards can solve your problem today, spending using your credit unwisely comes at a cost.

Credit cards are unsecured revolving debt, and most have incredibly high interest. Interest rates are often so high that if you don’t pay your balance right away, you end up paying double or even triple the amount you initially charged on the card. That’s probably why Americans now carry over one trillion dollars in credit card debt!

If credit cards are not the best idea for emergency spending, what are the alternatives? Actually, there are many other options available, such as personal loans. 

Advance America has loan options to help you out in just about every financial situation. Here’s how personal loans and credit cards work, how they compare, and how you can choose the right option for your needs.

What is a personal loan?

A personal loan is a loan type that can give you a lump sum of money from an online lender, bank, or credit union. In many cases, you’ll pay it back with interest via fixed monthly payments over a period of a few months to several years. Many personal loans are flexible, meaning you can use them to cover virtually any planned or unexpected expense.

What is a credit card?

A credit card is a thin piece of plastic or metal that lets you borrow as much money as you need - up to a set credit limit. It’s typically issued by a credit card company, such as Visa or American Express, and comes with rewards like cash-back or travel points. You can use this card for everyday expenses or regular purchases. If you don’t pay your credit card balance in full each month, you’ll face interest charges.

Personal installment loans, title loans, and cash advances (payday loans) vs. credit cards

Installment Loans vs. Credit Cards

You might think you can’t get a personal installment loan for an emergency expense. And even if you could, it’d take forever to be approved. Well, neither is true.

Is a Personal Installment Loan as Quick as a Credit Card?

At Advance America, you can apply for a personal loan and get an answer on your application within 15 minutes. Once approved, you’ll have cash in hand or in your bank account within 24 hours.

Do You Need a Good Credit Score for Installment Loan Approval?

Don’t have perfect credit? Don’t worry. When you apply for an Advance America installment loan, we don’t rely solely on your credit score, but use other factors and review additional documents to approve your loan. It is possible to secure this personal loan with bad credit.

How Do Interest Rates for Installment Loans and Credit Cards Compare?

Using a credit card for a quick expense can really cost you. You get hit with an interest charge every month and, if it’s not paid off, the monthly interest gets compounded. You end up paying interest on the interest! Even worse? Many credit cards have variable rates, meaning the rate can go up every month. And that’s on top of annual fees and late fees.

Installment loans typically provide one fixed interest rate: so you can know exactly how much you’ll owe at the end of the loan. The fixed rates for installment loans can also be lower than the variable rates that credit cards offer.

Better for Your Budget: Installment Loans vs. Credit Cards?

An installment loan offers a fixed payment each month, so you won’t need to guess how much to pay. That lets you plan your budget with certainty.

Credit cards have variable rates that can blow your monthly payment beyond your budget, and catching up on credit card debt will always mean less money in your pocket.

The Benefits of an Installment Loan

If you’re in a financial bind, you may be wondering whether to get an installment loan or a credit card. While the ease of a credit card solution can be appealing, installment loans can get you cash just as fast, with fixed interest rates to keep your budget intact.

Title Loans vs. Credit Cards

Let’s say you don’t qualify for a personal installment loan. You still have options. If you own your vehicle, Advance America offers title loans.

How Does a Title Loan Work?

A title loan is a secured loan that uses your vehicle as collateral. The value of your vehicle and the state where you live will determine the maximum size of your loan. Of course, you can continue driving your vehicle while you pay off the balance. 

Is a Title Loan as Quick as a Credit Card?

For many people, title loans are far easier to get than an unsecured personal loans. At Advance America, you just need to drive to one of our locations and bring the car’s title. We will evaluate your car and can offer this personal loan within minutes. You can drive away with cash in hand.

Do You Need a Good Credit Score for Title Loan Approval?

You do not need a good credit score to qualify for a title loan. Just stop by with your vehicle, title, and a few other qualification documents.

How Do Interest Rates for Title Loans and Credit Cards Compare?

We apply a fixed rate to our title loans, ensuring that you always know your payment amount. 

A credit card’s variable interest rate can compound with fees on top of fees, not to mention the ever-present temptation to borrow more money by using the card.

Better for Your Budget: Title Loans vs. Credit Cards?

With regular and dependable monthly installments, title loans are a type of personal loan that can let you fit your cash crunch into your budget.

The Benefits of a Title Loan

Your title loan is a short drive away. Take advantage of the convenience and ease of quick loan approval to cover your expenses today, and enjoy the predictability of a fixed-rate title loan to get the most out of your budget.

Cash Advance Loans (Payday Loans) vs. Credit Cards

Advance America offers cash advance loans, which can provide advantages over using a credit card.

How Does a Cash Advance Work?

A cash advance, or payday loan, is a quick loan against your next paycheck. Good credit isn’t needed, and you can typically get money the same day you apply. Since these personal loans are tied to your paycheck, the amount you can borrow is typically no more than $2,000. Plus, they must be repaid in full, usually within two to four weeks.

Is a Cash Advance as Quick as a Credit Card?

You can get an instant approval decision when applying for a cash advance. When approved in-store, you can get cash right away. For online applications, if your online application is approved before 10:30 AM ET (M-F), you typically receive funds in your bank account by 5PM ET that same day. Online approvals after 10:30 AM ET are typically funded the morning of the next banking day. Bank days are Monday-Friday, excluding holidays.

Do You Need a Good Credit Score for Cash Advance Approval?

A low credit score will not prevent you from getting approved for this type of personal loan.

How Do Interest Rates for Cash Advance Loans and Credit Cards Compare?

Interest rates for credit cards are typically comparable to interest rates for cash advances.

Better for Your Budget: Cash Advance vs. Credit Cards?

The good news is, unlike credit cards, cash advances mean no lingering payments hanging over your head for months or years – and no compound interest to worry about! You get the money you need when you need it, and you repay it on payday.

The Benefits of a Cash Advance

Cash advances get to your wallet right away and are repaid within two to four weeks, so you won’t worry about interest rates, ballooning balances, or busting your budget. 

When you should use a personal loan vs. credit card

If you have a large, one-off expense, such as a car repair, medical bill, or home improvement project, a personal loan is a great option. You may get approved for a larger borrowing amount than you would with a credit card. Plus, you’ll be able to repay your debt through predictable monthly payments you can budget for in advance.

A credit card is designed for smaller, more regular expenses that you can repay fairly quickly. You might want to use one for things like utilities, groceries, and entertainment. As long as you repay what you spent in full each month, you won’t owe any interest. Depending on the card you choose, you might also earn valuable rewards like free cash or airfare.

Which is better for debt consolidation: personal loans or credit cards?

For debt consolidation, a personal loan is often the right choice. You can land a fixed interest rate so your monthly payments will stay the same until you repay the debt. Some lenders will even make payments to your creditors for you, further simplifying the process.

While you can also consolidate debt with a credit card that has a 0% introductory APR period, you may need good or excellent credit to qualify. You may also have to pay a balance transfer fee. In addition, if you don’t repay your debt before the introductory period ends, you can expect a higher interest rate that leads to more expensive payments.

Should I get a personal loan or a credit card?

A personal loan is worthwhile if you have a larger one-time expense, whereas a credit card can help you pay for everyday expenses with ease. Depending on your situation, it might make sense to get a personal loan and credit card since these financial products can help you meet different goals.

Get an Advance America personal loan

When it comes to a personal loan versus credit card, knowing the big picture can help you save time and money. Before you give up and just say, “charge it,” take a look at how Advance America loans can get you the money you need today.

With different types of personal loans to choose from, Advance America gives you the flexibility you need to manage your financial life efficiently without getting bogged down in credit card debt.