Personal Loans: The Superior Choice Over Credit Card Debt
Are Personal Loans Better than Credit Card Debt? Absolutely, YES!
When it comes to financial risks, credit cards can definitely drown you in debt if you're not careful about managing your finances. Many people avoid applying for a credit card due to the fear of unmanageable debt in the future.
Although credit cards offer some benefits, they pale in comparison to personal loans in many ways.
Sticking to a Budget is Harder with Credit Card Debt
Credit cards don't offer fixed terms, meaning you need to constantly adjust your budget each month. Even if you meticulously track every expense, you still need to allow some leeway because the computations credit card companies use can be confusing and overwhelming for most people. With personal loans, the payment schedule and amount due each month are known, allowing you to plan your budget accordingly.
Credit Card Rates are Shockingly Higher than Personal Loans
The average monthly interest rate for credit cards in the Philippines is around 3.5%, which translates to 42% a year! This compounded interest can quickly turn your debt into an uncontrollable monster. In contrast, a personal loan with an APR of around 20% results in a fixed monthly payment. For example, a PHP 20,000 loan only sums up to PHP 24,000 at the end of the year, with a monthly payment of around PHP 2,038 if the loan is for one year.
Credit Cards are Not for Those with Poor Self-Control
Owning credit cards can lead to a vicious cycle of debt if you lack self-control. It's tempting to pay just the "minimum payment required" even if you can afford to pay off the entire debt, thinking you can use the cash for "more urgent" things. Additionally, the increased purchasing power with credit cards can encourage overspending. Credit card companies often entice you to use your card, while personal loan providers typically ensure you won't miss payments to avoid penalty fees.
Missing a Payment Can Be Disastrous
Failing to pay your credit card bill on time can start a financial disaster. Missing a payment results in a hefty late payment charge (whichever is higher between PHP 500 or 6% of the amount due). This fee compounds with ongoing interest rates, making your debt grow rapidly. With a personal loan, missing a payment might incur an additional fee of around PHP 400 on top of your principal for every month you miss.
Not to Say Credit Cards Should Be Avoided Completely
While credit cards can be useful for urgent expenses, if you have the means to take out personal loans, it's generally better to apply for them rather than relying on credit cards.
Ready for a Personal Loan Application?
Junrix E-Services enables you to receive personal loan offers from the largest network of legitimate lenders in the Philippines through a single online application form. Our loan advisor will assist you through the entire loan process, from application to approval.
