When you are in need of some cash or credit you may either opt to swipe your credit card or go with the traditional way of taking a loan. However, beyond the many similar attributes of personal loans and credit cards, they share many differences. Here we will explore the reasons why a personal loan might be better than a credit card.

1. When you need cash upfront

In order to make a major purchase you can use a personal loan over a credit card that could use up half or more of your available card credit amount and you don’t plan to pay off the balance right away. This level of expenses on your credit card could have a negative impact on your credit score. However, for big purchases that lack convenient financing options, like a medical procedure, car repairs or a home renovation, a personal loan will give you liquid cash so you can move forward with the needed expenditure.

2. You want a lower interest rate

Personal loans are specifically designed for paying over the long term, so the interest rates on personal loans are tailored to be fair and conducive to paying off debt. Though the APR on your loan depends majorly on your credit score. Credit cards make very little sense as a long-term revolving debt unless you have a 0% intro APR offer.

3. You want to have a structured payment schedule

One of the greatest differences between credit cards and personal loans is the way they are disbursed, and the way they are paid back. Credit card repayment is based on the current balance held, which can increase based on your spending and interest for an unpaid balance. You can take as long as you want to pay off a credit card balance, but the longer you take, the more interest you pay.

In a personal loan, liquid cash gets disbursed to you in one lump sum, and come with a built-in repayment plan. You know the exact amount that has to be to pay back each month, you know how much will go to interest and how much will go to the principal, and the final date of payment. A personal loan is a great way to discipline yourself to pay off the loan. On the other hand, credit cards are open-ended loans, you don’t have to pay them off at any particular time.

4. You can consolidate other debt

Credit cards offer balance transfer for borrowers who want to move debt from one card to another. However, this only works when the card you’re transferring to has a 0% APR period. Otherwise, you would be paying a much higher interest rate on the revolving balance than you would with a personal loan.

Hence, a personal loan might work better than a credit card. Since it offers lower personal loan interest rates than credit cards, this is especially true if you have good or excellent credit. You will also have regular monthly payments to make over the length of your loan, which makes the personal loan a clear winner over a credit card.