What should be used to finance purchases today: credit cards or personal loans

However, when choosing the method with which to borrow, it is important to take into account the different options that exist to take care of the home economy and choose the one with the lowest interest rate.

The most common forms of financing are personal loans and credit card payments.

Credits with card

Each user’s credit card has a purchase limit so that the customer can spend on different operations, paying interest only for the money actually used. As the money is returned, a greater quota will be available, without exceeding the established limit, which will be related to the solvency that the bank considers the client to have.

Credits are also granted for a term, but unlike loans, when the term expires it can be renewed or extended.

Card credit payment methods

• Full payment: the total sum of the summary for that month is paid (all installments with interest included, if any, plus bank administrative expenses).
• Partial payment: you can pay less than the total that arrives in the monthly settlement of the card, but more than the minimum. There is the possibility of making partial payments. The difference with the full payment will be that the new outstanding balance will generate new interest, which will be calculated based on the amount that was outstanding and how long it took to pay off that balance.
• minimum payment: Another option is to make a minimum payment, if you do not manage to collect all the money necessary to make the total payment. This option implies paying additional interest to the original ones, which will be calculated based on time and the amount owed.

If at least the minimum is not paid, the card will be blocked.

What is a personal loan?

The personal loan is a sum of money that an entity or person delivers to another in exchange for a certain price. As a base, the borrowed capital plus interest is established, generally distributed over a determined period of time.

The amount of the loan will be returned in one or several (periodic) payments. The repayment of the loan is normally made by paying regular installments (monthly, quarterly or semi-annual) over an agreed term. Each installment usually includes part of the initial capital lent and the agreed interest.

5 tips to keep in mind when taking out a loan

• Don’t ask for more than what is needed. If more is requested than what is needed, interest and commissions will also grow. There is an erroneous belief that the more, the better.
• The less you ask for in the loan, the better. If the necessary amount is requested, borrowing times will be reduced, so it is convenient to request only what is needed for a justified reason.
• Try to take the loan in a limited period and not do it in a very long term, to pay smaller installments. In the latter case, more interest will be paid on the loan, in addition to being in debt for a long time.
• Find out about the existence of products linked to the loan. Especially when it comes to a bank loan, it often happens that the granting of aid sometimes requires the contracting of other products such as a credit card, an insurance policy or a pension plan.
• Comparing similar products at the same term to see which may be more profitable is another of the most common mistakes when hiring a loan.

Credit card or personal loan: which is more convenient?

To make a cost comparison between the different types of indebtedness, it is important to take into account the CFT (Total Financial Cost), which includes the effective annual interest rate (TEA) and all those costs associated with the operation (insurance, taxes, among others). In addition to keeping in mind what is the expected inflation rate by the end of 2023.

Currently it is more advisable to borrow with the cards, as he explained in dialogue with Ambit the director of Focus Market, Damián Di Pace. In this sense, he argued that in “credit card loans that the rate is regulated and the government is subsidizing them, in fact, it lowered them.”

“The Government lowered the Ahora12 rate by nine points, lowered the financed balance of credit cards by two points and increased the limit for consumption with a credit card by 30%,” said Di Pace.

In this way, the conditions for financing with a credit card are much more favorable with these regulated rates, by the Central Bank of the Argentine Republic (BCRA).

“Personal credits give a rate of 280% to 360%, when with Now 12 you finance yourself with CFT of 132%, which is even below future inflation,” Di Pace explained to this medium, taking into account that the Year-on-year inflation is projected at 148%, according to the latest Survey of Market Expectations carried out by the BCRA.

So, the gap between one type of debt and the other “would give almost between 150 and 200 points between financing with a credit card with a rate subsidized by the BCRA and doing it with a personal or extra-bank credit,” he concluded.

Credits: key to take into account

However, when a person does not have a registered salary, such as the case of the monotributista, or has a lower level of income and is not eligible to take a personal loan, the cost of financing is higher since a loan will be taken out of a bank and the cost of financing rises above the bank.

Within the options to take personal credits for those people who do not have a registered salary, virtual wallets such as Market Payment, oula and Orange X They offer loans to their clients with amounts ranging from $500 to $800,000, subject to credit qualification. The Total Financial Cost (CFT) varies between a Minimum: 311.59% – Maximum 604.39%, depending on the credit profile of the loan applicant and the chosen term.