Consumer loan or credit card – what suits you best?

Credit card and consumer loans have some different characteristics and what suits best depends on your needs and use pattern.

A consumer loan is a good alternative to a credit card, particularly if you are concerned about predictability regarding your monthly expenses. A consumer loan namely has a fixed plan for monthly repayments, which many people experience as a security for keeping overview and control over your own finances. Therefore, you do not have any surprises when you come home from the holiday you have borrowed the money for, and shall begin to repay the loan. 

A credit card allows you more flexibility than a consumer loan, in that you always have money available – as long as you have not spent the whole of your available credit. At the same time, this flexibility can mean that some people borrow more than their finances tolerate. The credit card therefore requires that you are disciplined, have good control over the use of the card and repayment of used credit.  

In short, a consumer loan is the best choice for larger purchases which are planned repaid over a length of time, while the credit card is more suitable for smaller purchases which are to be repaid quickly.   

Advantages of a consumer loan:
   

  • For those wishing to borrow a lump sum which is repaid through a fixed repayment plan. A consumer loan provides structure and predictability in your finances, and you know exactly how much you shall repay each month.
  • The repayment plan helps you to repay the debt quicker. 
  • The interest rate is lower than on a credit card debt. 
  • With a consumer loan you can refinance expensive small loans. 

Advantages of a credit card:
  

  • For those wishing flexibility in that you can always borrow more, as long as you are within the credit limit. 
  • You have interest-free extension of payment of between 30 and 52 days. 
  • You decide how much you will pay over a certain period. 
  • The card can give you the additional advantages such as bonuses and rebates in stores, restaurants, internet shops and other co-operation partners of the card issuer. 
  • Travel and cancellation insurance is often included if you pay half or more than half of the travel by credit card, as well as access to a range of good additional insurance coverages. 

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