Announcing The Winner of Our Financial Literacy Scholarship (Spring 2022)
We are awarding $750 to a student every semester. All you have to do is show us how financial literacy has made a difference in your life.
We’ve all been in a situation where we need to buy something right away but the cash just isn’t there, whether it’s for school, a gift or an emergency sometimes charging it seems like the best and easiest option. Credit cards aren’t always the answer to all financial problems and as a matter of fact, they rarely make the situation better. Credit cards can and will make most financial problems you’re having worse. Next time you’re thinking about charging something important or something you can’t afford, consider taking out a personal loan instead. A loan probably seems like a lot of work but in reality, it’s no more difficult to apply for than a new credit card, here are 5 situations when you should choose a personal loan over a credit card.
Medical expenses like dental work and new eyeglasses are extremely expensive and often not covered by all types of medical insurance; therefore people often choose to charge those expenses. Unfortunately, the high costs of these medical expenses can hurt your credit score. Here’s the situation, if you have a $4,000 medical bill and charge it to a credit card that only has a $5,000 credit limit you’ll be using 80% of your available credit. One of the most important factors in determining your credit score is your credit utilization ratio: the ratio between available credit and used credit. If you constantly have a maxed-out credit card or a card that only has a small amount of unused credit your score will be negatively affected. Generally speaking, a good ratio to have is 90% available credit and 10% used credit.
This is where a personal loan can help. Loans or credit accounts will show up on your credit report as either installment or revolving. Credit cards are revolving and personal loans are typically installment, the “utilization ratio” doesn’t apply to installment loans so you won’t have to worry about it negatively affecting your credit score. In fact, personal loans with installment payment plans will help you improve your score and show that you are responsible with your finances.
Sometimes credit cards with large credit limits can be extremely tempting especially when the minimum payment is often so low. Falling into the minimum payment trap is exactly what credit card companies want you to do, this way they make more money from all the interest that you’ll end up paying. If you need to pay for something important but can’t trust yourself to use your credit card responsibly and not continue to charge other things then you should consider getting a personal loan from lenders like easyfinancial to cover your expenses.
Getting a personal loan to cover a specific cost means that you’ll only have access to the exact amount of money you need and won’t be tempted to spend it on something frivolous. Furthermore, a personal loan has a set repayment plan and due date, this means you’ll be able to make affordable monthly payments and won’t be in debt indefinitely. You’ll also save on interest as personal loans typically only take three years to repay and credit cards can take significantly more especially if you’re only making the minimum payments.
In recent years there have been laws and regulations put into effect to prevent credit card companies from exploiting their customers. Unfortunately, this doesn’t mean that all companies provide credit cards that have the consumers’ best interests in mind. Interest rates on credit cards can often be very high and if you’re unable to pay your balance completely every month you’ll end up spending too much money on interest. This can become an even more serious problem if you have a variable interest rate credit card where your interest rate fluctuates.
On the other hand, if you apply for a personal loan with a fixed interest rate you’ll always know how much interest you’ll be paying and there won’t be any surprises. Personal loans often have interest rates that are lower than some credit cards and payment plans that make it much easier to manage your finances.
Personal loans usually have lower interest rates than other credit products, which makes it ideal for consolidating high-interest debts. Moreover, consolidating your debts means you’ll only have to worry about making one payment a month instead of five or however many debts payments you were making. If you find yourself in a situation where you can’t keep track of all your payments or if you’re simply looking to save on interest, a personal loan can save you money and help you manage your debts.
Sometimes life gives us lemons, other times it gives us unexpected expenses that can cause financial distress. When you have a financial emergency, a personal loan can often help you cover the expense without having to drain your savings. A personal loan will allow you to spread your cost over a period of time at an affordable rate. Moreover, you won’t have to worry about making a big lump sum payment that could affect your financial stability, as you would with a credit card.
Applying for a personal loan can be just as easy as applying for a new credit card. You can start the process today with Loans Canada and have the money you need within a week.
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