Is a Personal Loan or Credit Card the Best Option for You?

Most people think of credit cards first when it comes to short-term financial tools. The average American has at least one credit card, according to the 2019 Experian Consumer Credit Review. Credit cards can be alluring, especially with the perks and points they offer. They can also help you build credit, but credit cards can also come with some hefty drawbacks. If you can’t pay off your balance each month or carry a large balance over month after month, a personal loan might be a better option for you. Learn more about personal loans and determine which option is the better financial tool for you and your finances.

When to Choose a Personal Loan

You can use a personal loan for almost any purchase. It’s a lump sum of money that is deposited into your account at once, unlike a credit card that acts like a line of credit. You can use a personal loan to consolidate credit card and other debts, pay off medical bills or make improvements to your home. Personal loans are unsecured loans, which means they don’t require collateral. Unlike secured loans, you do not risk losing your possessions if you can’t repay your loan. However, failing to repay your personal loan could lead to negative marks on your credit report and damage to your credit score. With a personal loan, you can borrow anywhere from $100 to $40,000 depending on the lender. Some lenders may provide more. How much you can borrow depends on many factors including your credit score and income.

Personal loans are a good option for large purchases. Your interest rate may be lower than a credit card offers, and you may be able to obtain a higher loan amount than your credit card limit. Some reasons to apply for a personal loan include:

  1. Consolidating multiple debts

You can consolidate multiple credit cards, loans, or both to make managing repayment easier and potentially lower your interest rate and what you owe overall.

  1. You want to pay off debt faster

Personal loans come with a fixed interest rate, which means your interest rate will remain the same through the life of your loan. No surprises means you can create a budget to pay off your balance by your due date. Unlike credit cards, you will have a payoff date, which keeps you accountable and helps many people pay down debt faster.

  1. You have access to cash

Many credit cards charge fees if you use them to withdraw cash. With a personal loan you can withdraw cash when needed.

When to Choose a Credit Card

Credit cards can be a convenient option for small and unpredictable purchases. There are some situations where using a credit card can be beneficial.

  1. You have small expenses to cover

While personal loans are a great option for large purchases, credit cards can be great for covering small expenses like a trip or holiday shopping.

  1. They are flexible

When you take out a loan, you get the entire sum upfront and have a repayment due date. If your finances fluctuate and you need cash again in the future, you would need to reapply for another loan. With a credit card, you can continue to spend money up to your credit limit when you need it. The downside is credit card debt can become overwhelming quickly and difficult to pay off.

  1. You take advantage of rewards

If you are someone who travels often or shops at the right stores, you could benefit from a credit card rewards program. If you manage your finances well, and pay off your balance each month, you could earn extra cash or rewards by simply spending money on the things you already buy.

How to Choose

Still not sure which option is best for you? Ask yourself these two questions to determine whether a personal loan or credit card is the best option for you.

  1. Are you able to pay off your credit card balance monthly?

If you have a credit card, do you pay off your balance each month or do you let debt rollover? Do you currently have multiple credit cards close to their credit limit? If you have never had a credit card, do you have the wiggle room in your budget to cover expenses you would put on your credit card? If the answer is yes, you could benefit from a credit card that offers rewards and/or perks that benefit you.

  1. Do you have a purchase in mind?

Are you looking to finance a specific expense or purchase? If you know what you need the money for, a personal loan is a great option. If you are just looking for flexibility in your spending, a credit card is a better option.


Everyone’s financial situation is different. Only you can control your spending habits and budget. It’s up to you to borrow and spend responsibly regardless of which option you choose. When shopping for a small personal loan, consider Mountain Summit Financial. You can borrow between $100 and $1,500 and receive funds as quickly as tomorrow.

Ready to Get Funding?

At Mountain Summit Financial, we’re here for you. If you’re ready to get the funding you need, start your short term loan request now.

Ready to Get Funding?

At Mountain Summit Financial, we’re here for you. If you’re ready to get the funding you need, start your short term loan request now.

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