When you don’t have enough cash on hand, borrowing funds is the most viable option. You can choose between a personal loan and a credit card. Both have their advantages and disadvantages. You should pick the one that best suits your current financial situation. 

How Do They Work?
One thing the two types of debt have in common is that you need to repay the principal with interest. They do have several differences, nevertheless. 

A credit card is a revolving line that can last for a lifetime. It comes with a spending limit and a minimum repayment amount for each month. Most cards come with yearly fees, but they also have balance transfers, reward points, and interest-free promotions. 

A personal loan provides you with a lump sum along with a specified period to repay that entire amount with interest and any other fees. Most personal loans come with terms ranging from one to seven years. 

Advantages and Disadvantages of Personal Loans
Personal loans often have lower interest rates than credit cards, which makes them cheaper than the latter. They come with a repayment schedule that relieves you of the debt, if you can repay the balance in full, and on time. Luckily, you don’t need to worry about overspending because the creditor provides you with a lump sum. 

You can use a personal loan for anything, but it is a great option to fund large expenses that you don’t have savings for. Many people choose to take out personal loans to fund their startup businesses. If you are going to get an unsecured one then take a look of source, it will not require collateral. One benefit to that is that there’s no risk of losing any assets if you are unable to pay back the loan on time. You can also improve your credit score when you keep up with your payments. 
On the other hand, you will carry the debt of a personal loan for the duration of its term and some providers have inflexible terms that don’t allow early repayments. Traditional lenders sometimes have application processes that take weeks to complete, leaving you unsure whether you will get an approval or not. 
Incidentally, unsecured debts are more expensive than secured ones. Some providers don’t allow prepayment or charge you a fine for early payments. These additional fees can lead to excessive payments. 

Personal loans are ideal for big one-off financial needs such as home renovations or cars. They can also be helpful for the consolidation of large debts. 

Advantages and Disadvantages of Credit Cards
Once you have a credit card, there are many advantages that come along with it.  For one, you can immediately use it to pay for goods and services, and it comes with a reward program that gives you points for every dollar you spend using it. Using it regularly will help you earn reward points that you can exchange for flights, hotel rooms, and other luxuries.  

Credit cards are also a convenient way to secure readily available funds, which is great for when you don’t want to carry cash. Most issuers offer an interest-free period for new accounts and they can often be used for balance transfers to consolidate various debts. They work great for traveling overseas and most physical stores and online shops allow major credit cards as an acceptable form of payment. You can also use it to rent cars and book hotels. 

Another benefit to owning a credit card is that it allows you to build up a credit rating. Most issuers provide a limit that is twice the amount of your income, allowing you to pay your bills or buy necessary items even if you don’t have cash. Providers generally have a 24-hour customer service hotline that you can contact for help when needed. 
At the same time, there are also some disadvantages to owning a credit card. They often have a high interest rate, which makes them more expensive than some personal loans. If you can’t pay the full balance each month, credit cards accumulate interest indefinitely until you repay the entire amount, which can damage your credit rating.  

Some people may also develop bad financial habits by using their credit card. Consumers with weak self-control might accumulate bad credit by overspending and maxing out their accounts.  
Which is Better? 
When it comes to choosing between a credit card and a personal loan, the answer is not simple. There are several factors that you need to consider first, as one type of debt might be suitable in one instance, but not another. Here are some factors that you should consider choosing the best solution for your problem. 

1. Where You are Going to Spend the Funds?
If you need continued access to a line of credit, then you should apply for a credit card. If you need funds for an expensive item, then you should consider getting a personal loan. 

2. Repayment Scheme
A credit card is an ongoing debt, while a personal loans end on a specific date. You should consider how disciplined you are in paying back your debt. If you don’t trust yourself with an access to a line of credit, then you should consider getting a personal loan instead, since it has a more concrete repayment plan. 

3. Consolidating Debt
You can use either a credit card or a personal loan to consolidate debt. Of the two, consolidating everything into a loan is often the best choice, because loans have lower interest rates than credit cards. 

4. Amount of Money to Borrow
Another factor to consider is the amount of money you need to borrow. Keep in mind that there are different types of personal loans—secured and unsecured. The former has a much higher limit than the latter but comes with stricter qualifications. The same goes for credit cards. Accounts with higher spending limits often have more stringent eligibility criteria. 

Choosing the Right Debt
As you can see, both types of debt have their pros and cons. Whether you choose to get a personal loan or a credit card, it is important that you choose the one that provides you with the most value. You should shop around and find a lender or provider that offers the ideal financial solution to your problem. 

Ultimately, the first thing you need to consider is the interest rate. A personal loan is usually less expensive in this area than a credit card but if you get a wrong use than it can be devastating . Always look at the APR and the fees charged by the creditor as well, to determine the true cost of the loan.    

When getting a personal loan, creditors will collect various fees, including an application fee, closing fee, processing fee, and an insufficient funds fee, just to name a few. On the other hand, credit card companies collect an annual fee. Consider that some providers will waive the annual fee for loyal clients. It is important to compare all the options available to come up with a smart decision.