Should You Take Out a Loan if You Already Use a Credit Card?

LOS ANGELES - November 13, 2020 - (

If you’ve been hit with an unexpected expense and need help paying bills, it’s critical to decide which method of payment you’ll use. If you already have a credit card, does it make sense to use it or consider a loan? Check out the tips below for how to make the best decision when it comes to paying for life’s larger expenses.

The Difference Between Cards and Loans

It’s first essential to understand that credit cards and personal loans serve different purposes. Credit cards are higher-interest revolving credit lines designed for purchases you can pay off monthly. In contrast, personal loans like cash advances are unsecured loans created to give customers the flexibility of cash with different kinds of repayment plans depending on your needs.

When to Consider the Card

  • You can pay it off in the grace period - Credit card interest only kicks in after an interest-free grace period each billing cycle. Pay off your debts in the grace period before they’re due and you don’t have to pay any interest at all. However, this doesn’t apply if you already have revolving debt on the card.
  • You get rewards - Some credit cards offer rewards for purchases from a specific company or in a particular category of goods or services. If you could get 5% or 10% cashback using a card, factor that into the purchase cost.
  • You are in the promotional period - If you have a high credit score, some cards may give you the first year or two of purchases with 0% interest. This is a no brainer if you plan to pay off a large purchase before the promotional window expires.

When to Consider the Loan

  • You can’t pay for it with plastic - Some of life’s biggest expenses, like rent, mortgages and auto loans, simply don’t accept credit cards as a form of payment. In that case, your choice is cut and dry, as loans may be the only option that works.
  • You need a larger sum than your credit card limit allows - Since personal loans are lump sums, they are often for larger amounts of money than a lower credit limit will allow.
  • The interest is manageable - Do the math to figure out how much interest you’ll repay over the life of the loan. It could actually cost you less in interest to pay back the money over 6 months with an installment loan than 6 months on a credit card.

Whichever option you decide to go with for your big life purchases, it’s essential to make sure you’re clear on expectations for repayment. By doing a bit of simple research, you’ll be able to make the best decision and be certain that you’re getting a great deal.

Notice: Information provided in this article is for informational purposes only. Consult your financial advisor about your financial circumstances.

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