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You may be tempted to turn to your credit cards when you need cash. While that is often the quickest option, it's not the best for your financial health. Here are two reasons why you should opt to take out a personal loan rather than a credit card advance.
The Advance May Be Too Little
One edge credit card advances have over personal loan is they are very easy and quick to get. You can use any ATM to withdraw the money from your card or deposit one of the bank's convenience checks into your account. No need to apply and wait for a response since you've already been approved for the credit card.
The problem is the credit card company limits how much cash you can get from your card. For example, even though you may have a $10,000 credit limit, the company may only let you use 20% (or $2,000) for cash advances. To get more than that, you must request a credit limit increase, which may or may not be approved.
On the other hand, the amount of money you can get through a personal loan is only limited by your personal financial circumstances. Many lenders offer unsecured personal loan amounts of up to $50,000, but you can get more than that if you have the income and credit to qualify. Even people with bad credit could get more from a personal loan than they could from a credit card.
It's worth undergoing a personal loan prequalification process to see how much a lender will let you borrow. This can help you determine which option will give you access to more money to help with your financial needs.
The Money Is Expensive
Another issue with credit card advances is the fees and interest rates that make the money expensive to get. Even though you may have a low interest rate for purchases made using your credit card, it's common for companies to charge a higher one for cash advances. On top of that, you'll be charged a fee of about 3 to 5 percent of the withdrawal amount just to get the money.
With a personal loan, you can find one with a competitive rate if you shop around. Some lenders will even do special deals where you won't be charged interest at all if you repay the loan within a certain period of time (e.g. 12 months). This can save you a lot of money in the long run.
To learn about the different personal loans available or to apply for one, connect with a local lender.