Advantages of Choosing a Personal Installment Loan Over a Credit Card Cash Advance
If you need extra cash to cover an unexpected expense, you might wonder what your options are. One possibility is to use a cash advance from your credit card, which allows you to withdraw money from an ATM or a bank up to a preset limit. Another option is to take out a personal installment loan, which lets you borrow a fixed amount of money and pay it back in regular installments over a set period.
Learn a few of the advantages of choosing a personal installment loan over a credit card cash advance.
Lower Cost
A cash advance from your credit card typically comes with a high interest rate, usually higher than the regular APR on your card. You may also have to pay a fee for each cash advance transaction, which can be either a flat amount or a percentage of the amount you withdraw. Moreover, there is no grace period for cash advances, which means that interest starts accruing as soon as you withdraw the money.
A personal installment loan, on the other hand, usually has a lower interest rate than a cash advance, especially if you have a good credit score and history. You also don't have to pay any fees for taking out the loan, except for origination or late payment fees, when applicable. In addition, unlike a cash advance, you have a fixed repayment schedule that helps you budget your monthly payments and avoid accumulating more debt.
Improved Credit Score
A cash advance from your credit card can hurt your credit score in several ways. First, it increases your credit utilization ratio, which is the percentage of your available credit that you are using. A high credit utilization ratio can lower your credit score, as it indicates that you are relying too heavily on borrowed money.
Additionally, it adds to your overall debt balance, which can also negatively impact your credit score if it exceeds 30 percent of your income. A cash advance can also trigger a red flag for potential lenders, who might see it as a sign of financial distress or poor money management.
A personal installment loan, on the other hand, can help your credit score in several ways. First, it diversifies your credit mix, which is the variety of credit types that you have. A diverse credit mix can boost your credit score, as it shows that you can handle different kinds of debt responsibly. Second, it lowers your credit utilization ratio on your credit cards, as you use less of your available credit.
It can also improve your payment history, which is the most important factor in your credit score calculations. As long as you make your loan payments on time and in full, your personal loan can increase your creditworthiness.
More Flexibility
A cash advance from your credit card might seem like an easy and quick way to get some cash when you need it urgently. However, it also comes with some drawbacks. For one thing, you are limited by how much cash you can withdraw. Your withdrawal limits typically depend on your credit limit and how much of it you have already used.
In addition, you have to find an ATM or a bank that accepts your card and charges reasonable fees for cash advances. Moreover, you have to deal with the hassle of carrying around large amounts of cash and keeping track of how much you spend and owe.
The application and approval for a personal installment loan might take longer than the withdrawal of a cash advance from your credit card. However, the personal loan also offers several advantages, such as a larger loan amount, depending on your income and creditworthiness. Also, you don't have to worry about finding an ATM or carrying around cash. And finally, you have more control over how you use the money and how you pay it back.
For extra cash, contact Ardmore Finance to apply for a personal installment loan. We can help you get the money you need.
