When to Use a Cash Loan Instead of Credit

Credit Cards vs. Cash Loans: An Explanation

Cash loans and credit cards both offer essentially the same thing - a way to pay for something when you don’t have enough money in the bank. You can take out a small cash loan and pay with this or you can put the expense on your credit card and “pay with plastic.”

So which option is better? When should you choose one payment method over the other? Let’s take a look!

Paid in Full

One difference in cash loans versus credit cards is the payment schedule. With a cash loan, you typically pay loans back in monthly installments. The lender is not expecting any more money that they agreed upon and it is perfectly okay to pay the loan back over the length of a few years. Credit cards, on the other hand, are best when paid in full at the end of each month. If your credit card carries a balance from one billing cycle to the next, you can get hit with high interest charges.

​When debating whether you should use a credit card or a cash loan as payment, decide if you will be able to pay the full bill by the end of the month or if you will need a longer period of time for repayment. If you can pay in full, use the card! If you need monthly installments, use a loan.

No Interest Credit Cards

Many new credit cards offer a 0% interest time period when you can make a purchase and let the card balance carry over from month to month without accruing any interest. So, if you make a $1000 purchase, you are simply paying back that $1000, no more, no less! If your credit card has this 0% offer, it is a great time to use your credit card rather than take out a cash loan which would charge interest. However, be sure to pay your credit card bill in full before the 0% promotion is up. No interest does not mean you can skip your monthly payments so be sure to pay on time!

Large Purchases

If you are planning on making a large purchase, a personal loan may be the best option for you. When you pay for the purchase with a cash loan, you can repay with monthly installments at a set interest rate -- you know exactly what you need to pay each month and that amount won’t change.

​If you make a big purchase with a credit card, you will be hit with varying interest payments month after month making it harder to budget and pay for the purchase. Carrying a high credit card balance can also harm your personal credit, lowering your credit score and possibly harming your financial future.

​When buying something large, you know it will take a while for you to pay back the money. A personal cash loan is the best option for these large purchases as they give you plenty of time to repay and a clear, set schedule on how to do so.

Credit vs. Loans: Making the Right Choice

With so many different forms of payment available, you want to be sure to pick the right one. A good rule of thumb to remember when choosing between a credit card or a cash loan is: big buys- cash loan, small items- credit card. No matter which option you choose, be sure to make your repayments on time so you can stay out of deep debt!