If you want to borrow money, you have the choice between a personal loan and revolving credit. What is the best choice depends entirely on yourself and the spending goal. It is especially important to be honest with yourself about how you handle money. That prevents problems afterwards. If you are tempted to use any money source at all times, it is better to opt for a personal loan. With a revolving credit, you would then hold the credit for too long and pay unnecessarily much interest. If you have enough discipline to only withdraw money for really necessary purposes and also to repay as quickly as possible, the flexibility of a revolving credit can be very pleasant.
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Personal loan meaning
The difference between a personal loan and revolving credit is great. A personal loan is a form of loan where everything is recorded: a fixed amount is borrowed at a fixed interest rate and a fixed term. You know exactly how much you pay and how long. Every month a part is repaid, the loan amount eventually ends at zero. Because of this clear payment arrangement, a personal loan is often used to finance a car, for example. The duration is then adjusted to the expected useful life of the purchased product. If you’re interested in personal loans, you can click here to find more info. Even if you’re a student, you can get student loans in no time.
Continuous credit meaning
A revolving credit is a much more flexible form of lending. With a revolving credit you receive a credit limit that you can use at your discretion: withdrawing money, paying off and withdrawing again. If you need another amount, it can be withdrawn without requesting a new loan. Payments already repaid can also be withdrawn again. For a revolving credit, you pay a fixed monthly amount that consists of interest and repayment. Because the interest rate is variable, you can’t tell us in advance what part of interest is paid, and therefore not how long you spend on repaying the credit. Due to each interim recording, it will take longer again until the credit has been fully repaid. Variable interest rates can ensure that the revolving credit becomes more expensive than a personal loan when interest rate increases occur, while with falling interest rates that variable interest is an advantage.
Features of personal loan
– You borrow a fixed amount
– You know what monthly amount you pay
– You know how much interest you pay each month
– You know exactly how much you pay off monthly
– You know when the loan has been repaid in full
Features ongoing credit
– With a fast repayment usually more advantageous than a personal loan
– You do not have to know exactly in advance what amount you need
– The loan is flexible. You can withdraw and redeem unlimited up to a limit
– The interest rate is variable, so you never know for sure how much you have lost interest
– Discipline is required so that the loan does not continue indefinitely
When choosing between a personal loan or the revolving credit, it is therefore important to check with yourself whether you are going for flexible and uncertain or for certainty and fixed agreements.