Latest update July 1st, 2018 8:27 AM
Personal Lines Of Credit vs. Credit Cards: Which One Should You Use?
If you get confused between credit cards and personal lines of credit, don’t be surprised. In fact, you’re not alone. Both of these sound and work quite similarly. But when you understand their differences – and there are quite a few – you’ll learn to do some Calculating personal lines of credit affordability and why it’s better than the plastics in some ways.
The Similarities
But first, know how they are the same. Both credit cards and personal lines of credit are loans; you are borrowing money from the lender (or the credit card issuer), and in turn, you pay it back with interest. There are also other fees involved, although with credit cards, it’s usually a balance transfer fee (if you wish to move your existing balance to another credit card to enjoy a lower interest rate) or late penalties. With them, you can also make cash advances. However, the biggest similarity is the credit limit, or the maximum amount of money you can borrow.
The Differences
Since you’re in the subject of calculating personal lines of credit affordability, you should know about the interest rate. Both charge interest on the principal balance, but that of a credit card is usually higher. That in itself already means savings for you.
Some credit cards allow you to withdraw money as a cash advance, but you are limited to around 20 percent of your credit line. Moreover, a cash advance uses a separate interest, which is even higher than the rate when making purchases. Personal lines of credit, on the other hand, allow you to access the funds whenever you need them, and you can get them gradually or all at once.
With regard to repayments, credit cards can give you a more leeway since lenders charge interest only after a specific period after the purchase. If you pay your debt right away, you don’t have to accrue any interest. It’s different from personal lines of credit, where interest expense begins as soon as you take out a loan. The good thing is it stops once you’ve made a repayment. Moreover, you can choose to pay weekly or for as long as 6 months.
They also vary in terms of requirements or basis of approval. You are more likely to be approved of a credit card quickly than of a personal line of credit due to stricter processes and criteria. Both would encourage that you have a good credit score, which is around 600 to 800. This way, you can have a more affordable interest and a higher credit limit. But personal line of credit lenders have a higher chance of checking your income as well.
Credit cards too offer other benefits such as rewards or rebates, which are missing in personal line of credit.
So which one should you pick? Based on calculating personal lines of credit affordability, this one is better if you simply want to have cash and gain more control on its use. If what you’re after is strictly funds for purchases, a credit card is a more ideal choice.
Knowing which financial tool to tap is crucial so you can properly forecast and plan your future. Calculating personal lines of credit affordability is important before you even sign up for one. Visit www.personallineof.credit to learn more.
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