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Why do Australians prefer personal loans over credit cards?

December 6, 2019

The latest revolution in Australia’s world of banking is that smart Aussies are cutting up their credit cards in favour of personal loans. It looks like individuals are becoming more cautious about taking on more credit commitments in the current economic climate. Here is why Australians prefer personal loans over credit cards:

Personal loans help you save on additional interest charges

Personal loans often come with a fixed interest rate. Thus, you can determine the exact amount you are expected to pay at each repayment date. Credit card payments, on the other hand, change every month depending on the interest rate on your account. Sometimes, you may find yourself doing more than just servicing the monthly interest.

A credit card doesn’t favour huge purchases

It doesn’t matter if you have enough disposable income to make large repayments each month; big purchases on a credit card will still attract a significant amount of interest. Credit cards are good for small, everyday expenditures like grocery shopping. Buying expensive stuff with a credit card is a bad idea because of the uncertainty of breaking free from the debt. Personal loans, on the contrary, are ideal for holidays, significant household expenses, and big-ticket purchases.

You can tell how far along you are with a personal loan

With a personal loan, you know exactly when you will be making the final repayment and be free from the particular debt. If you take up a personal loan to buy something, based on the price and interest you can work out that you will be debt-free in say, five years. If you make the same purchase with a credit card, you can’t quite tell when you will have cleared the balance.

Better debt consolidation with personal loans

Personal loans offer better consolidation options than credit cards. It can help you to not only save money, but also be debt-free quicker. You can negotiate a lower interest rate if you consolidate your debts with a personal loan. Credit cards charge a higher interest rate, which is not favourable for debt consolidation.

Do you need a finance broker to link you to the most competitive lenders? Talk to Empowered Finance today for advice on smart credit decisions.

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