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Signature Loans vs. Credit Card Loans

Oct 9, 2007
You need some extra money, but you can't decide how exactly you should go about getting it. You may be thinking about getting another credit card, or instead of adding a little plastic bulk to your wallet, you might want to get a signature loan. So which one would be best for you?

What are the benefits and pitfalls of both credit cards and signature loans? Here are a few facts about both that will help you to decide which one is best for you.

Signature Loans

These type of loans are pretty easy to get, especially if you have a good credit report. They require no collateral, but only the lender's approval and your signature. Whether or not you are approved for such a loan depends solely upon your credit report.

Lenders will examine and assess your credit report and determine whether or not you are qualified to receive a signature loan. Still, it is not impossible, either, to get a signature loan without having a good credit report.

One catch about signature loans is the interest rate. The interest rate can be low, but only if you have a good credit report. Your interest rate depends upon this factor just as much as your qualification does. You could get this type of loan even if you have bad credit, but the interest rates would be considerably higher than it would for those who have a good credit report.

Depending on your credit report, this attribute of signature loans could be either an advantage or a disadvantage over credit cards. The amount of money you can borrow is limited to a 1,000 dollar minimum and a 10,000 dollar maximum. Within these boundaries, you can set the amount of your loan to fulfill your needs, but this could make it difficult if the amount of money that you need to borrow is below or above this particularly range.

Credit Cards

Interest rates on credit cards vary depending on the credit card company, not because of the credit reports of the card holder. Credit cards usually have you put up some sort of collateral as a promise that you will pay back the money that you spend on your card. This ensures that the company will get the money owed.

The good thing about credit cards is that if you need less than 1,000 dollars or more than 10,000 dollars, you can usually get the amount you like. Credit card companies will give you a maximum amount that you could spend, then you set the limit within that range. Even if you could set your limits to a high number that would give you huge spending possibilities, you should always discipline yourself to spend within the amount you can afford.

Based on these facts, you can determine whether what you are looking for is a signature loan, or if it really is a credit card that you're looking for. It is important to know how each works, and what kinds of terms will go along with any kind of contract that you sign.
About the Author
Court consults people on credit card applications and helps people find the right internet marketing company.
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