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Is a credit card more expensive than a private credit?

Blog | Credit | Credit card

As a consumer you have the choice between a personal loan or a credit card if you need a financial help. What are the costs for a credit card in comparsion with a private loan?

The advantages of the credit card

The credit card are easily available because every adult can have one. It exists a lot of credit card companies. Thus the consumers have a significant supply.

The funding by credit card gives an open-end credit . It means that the consumer have a maximal amount of money to spend. To that level, the credit cards are flexible.

The costs of a credit card

The cost for a credit card are not just the interest rates but they are multiple. There are three main costs:

  • the annual fees: they are the management costs of credit card.
  • the financing costs: if you don’t pay the bill on time, this costs can include late fees
    in addition of interest rates.
  • the annual percentage rate: it includes all the administrative costs and the total interest rate.

The costumer have to pay a minimum monthly amount. For the most of cards, this amount is the most important amount between the next two: 5% of the current card balance or a minimum amount decided by the company.

This indicates that credit card causes automatically costs. And the costs for a credit card are often high.

The advantages of a personal loan

The bank credit is more difficult to access. The solvency of a client is carefully checked by the financial institutions. The banks and credit companies control the debt capactiy of the consumer too.

The private credit gives a total amount of money into the bank account of the consumer. This amount is used to a personal project like financing studies or building a swimming pool.

With a private credit it’s possible to do the early repayment of the sum. And when the sum is repaid beofre maturiy, the interest rate are reduced. Finally if the consumer can make an early repayment, the credit will cost less to him.

The private credit includes automatically a life insurance. This insurance avoids to the family of the borrower to inherit the debt (except in special cases).

The costs of private credit

The private credit generates costs related to interest rate and life insurance. This costs are more controlled than those generated by credit cards because the monthly payment are fixed. This then allows a better management of the budget.

The banks that offer very low interest rates for loans can charge their service by increasing the interest rate. For example, the bank can charging each call during the duration of the credit.

What is the best solution?

It depends on your need and your personal situation. Generally, the personal credit generates less expenses than a credit card. The monthly payments of a personal credit are fixed while those of credit cards are variable because they include many costs.

In case of financial trouble, it’s possible to opt for a debt consolidation loan to modulate more acceptable monthyl payments for your budget. Don’t hesitate to contact
our expert advisors.

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