Personal loans and credit cards cater to different needs and represent different types of credit. Consumers who cannot access traditional financial services may opt for online personal loans instead. Read on for a more detailed look at the two types of credit.
Overview: Personal Loans
- A personal loan represents a fixed amount of money borrowed.
- The loan must be repaid in full, including any applicable interest and fees.
- The loan is repaid in several installments.
- Personal loans typically offer lower interest rates and longer repayment periods than payday loans.
- You can apply for personal loans online and receive an immediate response.
- You can have funds deposited into your bank account in as little as 24 hours.
- You must repay the first loan you took out before you get another one.
- Here at LendProConnect, we don’t check your credit score or credit report during our simple online application process.
- You may qualify for online personal loans even with a low credit score, which can make them an attractive alternative to more traditional financial services.
Overview: Credit Cards
- A credit card represents a revolving type of credit, which means that you can borrow money repeatedly, within a certain limit.
- You must pay the credit card balance at the end of each month.
- If you don’t pay back the balance or only make minimum payments, you will face higher interest and fees.
- The credit utilization ratio refers to the amount you spend versus the amount available to spend.
- It is best to maintain a low credit utilization ratio – below 30% – because it can help improve your credit score.
- There is a wide variety of possible fees associated with credit cards, such as annual fees, interest charges, late payment fees, balance transfer fees, cash advance fees, foreign transaction fees, over-the-limit fees, and more.
- Paying off your credit card balance regularly can help improve your credit score.
- People who have low credit scores may face difficulty obtaining credit cards.
Personal Loans vs. Credit Cards
- Online personal loans may be an attractive alternative for those who do not have access to traditional financial services.
- Applying for a personal loan with LendProConnect will not affect your credit score.
- Even people with a low credit score can qualify for personal loans. However, they may face barriers trying to access credit cards.
- Paying off your credit card balance regularly and maintaining a low credit utilization ratio can help improve your credit score.
- Personal loans are meant to cover immediate expenses and help bridge a gap in cashflow.
- Credit cards are meant for recurring, everyday expenses.
A Hard Credit Inquiry vs. a Soft Credit Inquiry
When you apply for credit of one type or another, you must understand the impact it may have on your credit score and credit report.
- A soft credit inquiry has no impact on your credit score and does not appear on your credit report.
- A hard credit inquiry has an impact on your credit score and appears on your credit report.
- A credit card company may perform a soft credit inquiry before deciding whether to offer you a service and a hard credit inquiry before finalizing and approving your application.
- The lenders we work with usually do not perform credit inquiries, but if they do perform a credit inquiry, it will be a soft one, meaning that it will not impact your credit score and will not appear on your credit report. This is only to see if you qualify.
Bonus Tip
If you need to improve your credit score, sign up for Credit Verify! The registration process is quick, and you will be able to track your credit health and catch any errors on your credit report.
Conclusion
Those who do not have access to more traditional financial services such as credit cards may opt instead for online personal loans to help them cover urgent expenses. If you need to pay for immediate expenses, consider applying online via LendProConnect. We don’t check your credit score or credit report during our simple and quick online application process. Just submit a quick online application here.
