Loans and credit are two different ways to get some extra air into the economy. But there are two completely different methods, and both have both disadvantages and advantages. The right choice depends, among other things, on your personal preference, but also what you really want to spend your money on.
Here we give you an overview of the difference between the two methods, and we help you get a better insight into what is the optimal solution for you.
Important differences between loans and credit
Both loans and credit allow you to get some extra space in your budget and get advice on exactly what you need. But in practice, there are two very different things, and it actually plays a big part in which solution you choose.
In short, a loan is something you take from the bank or another lender, where you get paid out the whole amount at once, and then you have to repay after a certain period.
Credit, on the other hand, is a fixed amount available to you, eg on your credit card, but you don’t really get paid. There is money you can spend if you need it, and there is usually no set date for when you have to repay the money. There are many opportunities, and the different companies each have their own advantages.
Characteristics of loans
There are many different types of loans on the market, but generally it works by applying for a specific amount, eg $ 50,000, at a bank or another lender. Both the amount and the repayment period are agreed in advance, and you decide to a large extent yourself how much you want to borrow, and during which period the money will be repaid.
You get all the money paid out at once, and you can spend it on houses, cars, furniture or something else. Subsequently, you must repay the money within an agreed period, and this applies to both the borrowed amount and the interest accrued. It is an obvious choice if you are facing an investment with a specific amount, such as a new car, and if you want good control over a fixed repayment plan.
Characteristics of credit cards
Credit cards give you the opportunity to get credit. It is, in fact, an amount, which you agree with the bank, which you can spend without you actually having the money on the card. You do not get paid the money, and there is instead an available amount that you can use if you suddenly need it.
You can choose to spend the money at any time and on anything, and you do not have to apply in advance. Therefore, it is a very flexible and practical solution, and it is the obvious choice if you want the freedom to spend extra money whenever you want. You can usually repay the money when you have air left in the budget, and of course you only pay interest if you have actually spent more than you have on the card.
Thus, you do not get the money paid out as with a loan, and you choose whether you really want to spend from the available amount available on your credit card.