Credit Card or Personal Loan: Which One Is Best for You?

Most people don’t realize it but they make financial decisions almost every single day. Do you make your coffee at home or will you buy a cup at Starbucks? Do you eat leftovers for dinner, or do you order takeout? All of these are decisions that will affect your finances; they aren’t limited to whether you’ll get a small loan to buy a new car. It just so happens that loans and other bank transactions weigh more heavily on people’s minds.

,How do you pay for things you need but don’t have the money for at the moment? When answering this question, people often gravitate to two options: personal loans and credit cards. But which is the better option for you?

Here are some of the things you should consider when deciding whether you’ll use a credit card or apply for a personal installment loan.

Interest Rates

Credit cards interest rates are often steep. Although the Federal Reserve System’s Consumer Credit report puts the average credit card interest rates in the United States at ,14.61 percent, some studies found it at ,19.49 percent or even higher. Of course, these rates will not affect you if you can pay the full amount every month. But if you can only pay partially, you will have to carry the burden of interest for consecutive months.

By comparison, personal loans come with markedly lower interest and annual percentage rates (APR). The same Federal Reserve report reveals that personal credit has an average interest rate of 9.34 percent. This makes it easier for people to purchase big-ticket items like cars and appliances without paying a ridiculous amount in interest.

In this case, if you are buying small items that you can pay back in full every month, such as groceries or an installment plan for a cellphone, then credit cards may be the best option for you. But if you’re looking to buy a car, a personal credit loan may be more practical.

Time to Clear the Debt

One good thing about credit cards is that the interest rate will only be applied if you do not pay the debt in full after a billing cycle (about 30 days). However, if it will take you some time to clear the debt, then you can expect to pay an interest every single month. A 14.61 percent interest may not sound like much, but if your home’s broken water line needs $3000 in repairs, the interest will stack up. Imagine if you can only spare $75 every month, you’re looking at a total of $1,136.76 in interest that you can only clear after religiously paying for four years and eight months.

Imagine the same scenario, but you opt to apply for a loan that you’ll pay in installments for the next four years at 9.34 percent APR. This would mean that you’ll be paying $75.14 a month and only pay $606.74 in total interest.

When your credit card carries an extremely low interest rate or 0 percent promotional rate, you are looking at a good credit card deal. However, if you can’t enjoy either benefit and you can’t pay large amounts in full, you may want to consider applying for a loan that you’ll pay in installments.


Credit card and personal installment loans are great options if you’re in a financial pinch and need a little extra help. However, you have to assess your financial situation and your capacity to pay before using your credit card or ,applying for a loan. If you’re still unsure, you can always talk to financial experts or use credit card and loan calculators to make a more informed decision.

When you’re looking for a place that offers the best ,installment loans in Center Point, AL, you can count on Parkway Finance Company. We accommodate various loan sizes and reasonable payment terms. Call us, and let’s discuss your financial options today!