For most Aussies out there, there is usually a problem to be solved when they are in need of some extra cash. You might be in need of some money because of an unexpected medical expense, planning to do some renovations at your place, or just having some debts to pay off. Living in Australia has become quite expensive over the years. Therefore, it is important that you manage your money well. The right financial tool can save you thousands of dollars in the long run.
Both personal loans and credit cards can provide you with the money that you need when it is most needed. But the two financial tools are vastly different. Therefore, it is important that you get familiar with the difference between the two.
How Personal Loans and Credit Cards Differ
Personal loans and credit cards differ in that personal loans can provide you with access to a lump sum of money. You can borrow a lump sum of money that you can pay back after some time. When you apply for a personal loan, you are issued with an amount that you can pay back after some time. On the other hand, when you are issued with a credit card, you are issued with some money depending on your income level.
Consolidating Debt with a Personal Loan
It is very easy to get into debt with such high interest rates. A personal loan can be an intelligent way to pay off your debts. If you have several credit cards that you need to pay off each month, it might be wise to get a personal loan to pay off your credit cards. Personal loans have significantly lower interest rates than regular credit cards. If you get a loan with a lower interest rate, you can pay off your credit card debt in no time. You will be debt-free in no time and will avoid the hassle of paying off multiple credit cards.
Planning Your Finances with Fixed Repayments
Certainty is an excellent way to budget your household finances. A personal loan offers certainty because it offers fixed interest rates and fixed payments. You will be able to figure out exactly how much you will be paying each month and when your debt will be completely paid off. In this way, your debt will not be looming over your head for years and years.
A personal loan also offers an end date for your loan, which is fantastic for long-term financial planning. In addition, Australian lenders allow extra payments to be made to your personal loan without any extra fees. Credit cards only require a small percentage of your balance to be paid off each month, which can greatly add to your overall interest paid.
When to Rely on a Credit Card
However, there are times when a credit card from the likes of ING Australia is a better option. For instance, if you are in a position to pay your credit card dues in full every month, then a credit card is a very convenient option. Many credit cards offer up to 55 days of free interest on purchases. Using this free interest effectively means that you are effectively borrowing money for free.
In addition, credit cards offer very lucrative reward schemes. It is possible to accumulate frequent flyer points, cashback, or even free travel insurance simply by putting your purchases on a credit card. The value of any reward scheme, however, can be eroded very quickly if you are paying high retail interest rates.
The Smart Choice for Your Wallet
The key to choosing the perfect financing option for yourself lies in your current financial condition and spending habits. If you are in a position to borrow a huge sum of money for a one-time expense or if you wish to consolidate your existing high-interest debts, then a personal loan is the way to go. Yet, if your requirement is simply to have an easy way out for your daily expenses, and you plan to pay off the entire amount at the end of the month to earn reward points, then the winner in this case is the credit card!
