What is more profitable loan or credit card: advantages and disadvantages of the loan
Extensive lending opportunities allow borrowers to choose the most favorable and comfortable conditions. Any large bank, such as Sberbank, necessarily has in its loan portfolio the usual consumer loans and the issuance of credit cards for various occasions. Which option to choose depends on which is more profitable: a credit or credit card. This can only be determined after a thorough assessment of all the proposed parameters and the conditions required by the client.
A consumer loan is an inappropriate type of lending that allows you to receive and use money for any purpose. It is quite easy to get a loan, provided the bank meets the parameters. The loan is particularly popular among ordinary individuals, allowing for a short period of time to solve a financial problem.
Unlike other programs, consumer credit is issued without security, for a short time and within a strictly fixed limit. If a large amount is required, the loan is issued with additional collateral (collateral or guarantee).
To determine which is more profitable: a consumer loan or a credit card, the main parameters of the loan are evaluated, but in the course of cooperation, additional conditions may be useful for the client – bonuses, discounts, options.
The advantages of consumer credit
Considering the characteristics of a bank loan in cash, the following advantages should be noted:
- The borrower receives funds and can then spend them without additional fees and charging for service.
- The amount of debt remains unified, not providing for an increase in the limit and re-crediting As a result, the overpayment picture is fairly transparent and is calculated on the basis of the debt balance.
- The issued money remains at the disposal of the client, without the risk of unauthorized transactions and fraud, common among plastic payment instruments.
- The program assumes the possibility of obtaining a larger amount than is issued on a credit card.
- The rate on a loan, as a rule, is much lower, which means less total overpayment.
Good use is good when active cash payments are expected and the borrower does not need to renew the limit.
Disadvantages of consumer credit
When deciding which is better: a credit card or a consumer loan, you should study the negative aspects that can seriously affect the choice:
- In view of the possible loss of a part of the profit, banks are reluctant to allow early repayment, creating additional rules and restrictions that make it difficult to deposit additional amounts out of schedule.
- Interest begins to accrue as soon as borrowed funds are issued by the bank. There are no delays in the collection of interest overpayment and repayment of the standard terms of the contract.
- Annuity payment leads to the fact that first of all the borrower repays interest for the entire period, and the main body of the loan is extinguished mainly in the second half of the term.
- The client can only rely on the amount agreed by the bank. Re-use of the replenished balance is impossible and requires the approval of a new loan agreement.
When a bank offers both options to a borrower, you can choose which is better: a credit or a credit card by comparing the advantages and disadvantages of the characteristics. A bank card is an excellent alternative to a classic loan, when not only additional funding is required, but also a range of banking options.
Credit cards are well proven during travel, including foreign countries. With the help of plastic, it was possible to quickly and comfortably conduct non-cash payments, buy goods or services online.
Moreover, the cardholder can become a member of profitable promotional, affiliate programs, receive increased discounts and even return some of the money spent.
Saving time on the release of plastic will allow sending a preliminary online request, and for issuing a minimum of documents is required (sometimes one passport is enough).
Credit Card Benefits
There are many advantages of credit cards – they include not only increased comfort in the use of borrowed funds, but also the opportunity to save on interest overpayment with proper use of the grace period.
The main positive characteristics include:
- The use of a grace period allows the first 50–100 days to use borrowed funds without interest, that is, absolutely free. The condition is a full refund within a set period and non-cash expense.
- The revolving credit limit is available during the entire period of the card’s validity, if the borrower regularly repays all regular payments on time.
- Interest is accrued only on the remaining amount of the debt, i.e. for the funds actually used.
- For active users of goods and services of partner companies of the bank, the additional benefit is presented in the form of discounts, as well as cashback with a return of a certain percentage of the money spent.
- Many banks successfully implement various bonus programs, which can then be transformed into a discount or taken into account when paying for goods later.
Considering that it is easier to get a loan or a card, it should be noted that the plastic version of the instant issue allows you to receive funds in a matter of minutes.
Credit card drawbacks
Despite the increased comfort when using the card, there are some negative points:
- cashing occurs with a fee that increases the overpayment;
- the rate and interest overpayment is higher than for a classic loan;
- additional maintenance costs;
- high risk of online fraud, theft from the accounts, as well as plastic itself.
Depending on how you plan to use the loan amount and repay the debt in a particular situation, the bank’s customer selects the best option.
Which product is more convenient
Each borrower has its own priorities and values. For this reason, it is impossible to give universal advice which is better: a cash loan or a credit card.
Before applying for a loan, it is recommended to do the following:
- Compare the total percentage overpayment for the entire period of the planned repayment of debt using an online calculator.
- Establish the purpose of the use of funds – whether cash is required, whether serious non-cash transactions are planned.
- Determine whether further recurring amounts will be required.
A careful assessment of the parameters, based on their value to the client, will help you make the right decision.