The Minute Blog



Line of Credit

Installment Loans

Personal Finance

The Difference Between Loan and Credit

May 14, 2021 | Loans

Find Out Which One is Right for You

On the whole, credit cards and loans both allow you to borrow money instantly, or almost instantly. They both have many of the same basic credit provisions and requirements. They also come with a set interest rate, a monthly repayment schedule that include the principal and interest, late fees, underwriting costs, etc.

But despite the similarities, there are some major differences you need to be aware of when you’re deciding which loan is best for you.

Personal Loans

A personal loan gives you access to money upon approval, with generally lower interest rates over a fixed period of time.

A personal loan doesn’t offer you ongoing access to funds the way a credit card does. The borrower gets a one-time lump sum, fixed repayment amount and schedule. And a set time in which to retire the loan.

Secured vs Unsecured Loans

An  unsecured loan  can be used to finance a large purchase, consolidate and pay off credit card debt. It can also be used to refurbish your home, or just cover a gap in your income.

A  secured loan  can also be considered a personal loan and may be easier to qualify for, since they come with a possible lien on your assets. The lender has the right to seize your car or even your home if you’re delinquent over a specified amount of repayment periods. The loan may come with better rates and terms since you’re offering something tangible in consideration of the money you’re borrowing.  But think carefully about entering into an agreement like this. Unless you’re absolutely positive you can meet the monthly payments until you’ve retired the loan.

Credit Card Cash Advance

A credit card allows you to borrow money instantly with  revolving credit. You’ll have access to funds as long as your account remains in good standing.  You may also qualify for credit limit increases, but the interest rates are usually higher than those of a loan.

Using a credit card is better determined by the size of the purchase and the interest rates attached to it. For example, you need a loan fast to cover an unexpected emergency, like a car repair, or a new water heater. Only use the plastic if you know you can pay the loan off in full when the next statement comes due.  The card has a zero-percent interest rate, or at least a very low interest rate. In that case, you can afford to pay the amount of the cash advance off over the course of several months.

But unlike a loan with fixed payments, credit card payments will probably vary each month. If you make only the minimum monthly payment, very little of that money goes toward the principal. You could be paying the interest off for years before you ever hit a zero balance.

If your credit rating isn’t all that outstanding, using the credit card gives you the chance to build up your score. Unfortunately, it may also come with a higher interest rate than a loan. The interest and fees can add up quickly, so you may find yourself in worse shape than you started out at.

A Third Option

If you need an instant money loan, Minute Loan Center may be a better option for you.

MLC offers installment loans. An installment loan is similar to a personal loan. We specialize in helping people whose credit may be an obstacle to securing a bank loan or a credit card advance. We don’t need collateral, just a paystub that shows you’re employed and have the means to repay the loan.

And you’ll be paying back the loan in fixed monthly installments. A portion of each payment goes toward the principal, and another portion goes toward paying down the interest.

To learn more about Minute Loan Center and what we can do for you, check out our website at:

The information provided is for informational purposes only and is not a substitute for professional financial advice. You should consult a credit counseling professional concerning the information provided and what should work best in your financial situation. And any action on your part in response to the information provided is at your discretion.

Related Articles

The Best Short-Term Loans for Bad Credit [Brief Guide]

The Best Short-Term Loans for Bad Credit [Brief Guide]

Do you need to borrow cash but can’t get a traditional loan because of bad credit? A short-term loan may be the solution for you. But where can you get a loan with a low credit score, and how would you choose the best credit lender?  In this article, we discuss...

read more