What’s the Difference Between Unsecured Loans and Credit Cards?
Other Personal Finance Information and Help
UnsecuredLoan.bz has other helpful resources provided to help you understand the unsecured loan process:
What are Unsecured Loans Used For?
Understand the Difference: Unsecured vs Secured Loans
What's the Difference Between an Unsecured Loan and a Credit Card?
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Many of the things you might use an unsecured loan to buy could also be paid for with a credit card. But there are important differences between an unsecured loan and a credit card that you should know about first.
Credit Cards
- Interest rates on credit cards are often higher than for unsecured loans, with even higher rates if you take a cash advance from your credit card holder. In addition, if you are late with a payment on your credit card, the organization that issued the card can increase your interest rate and impose a late fee plus finance charges.
- If you continue to make charges on your account, your balance and monthly payment will rise.
- Credit cards offer you the option to pay a minimum amount due every month rather than the full balance, but paying just the minimum means you take longer to pay off your debt and will pay more in interest over time.
- Carrying a large balance on your credit cards can lower your credit rating.
Unsecured Loans
- Unsecured loans typically have fixed interest rates and monthly payments, so the lender cannot raise your interest rate or increase your monthly payment at any time.
- With an unsecured loan, you have the full term of the loan, which is often several years, to pay back what you borrowed without having to pay additional fees and interest if you pay on time.
- You receive the total amount of your loan when you are approved. There is no way to add to the amount you borrowed over time, so your balance decreases over time if you make your payments on time.
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Consumer Finance Resources
The Debt Consolidation Loan Directory, has a growing library of personal consumer finance resource information that is available to help educate you and allow you to make more informed decisions when managing your money:
What Type of Credit Do You Need? – CitiFinancial offers this resource to help you learn the differences between three basic types of consumer credit and to determine which is right for your personal needs. Installment loans, revolving credit and consumer leasing is discussed. (Credit Tips)
Credit Card Shopping? – Shop this sub-directory for credit card companies providing a wide range of credit cards with different options and incentives. (Directory of Credit Card Lenders)
