Do you need a money boost for unexpected travel? If you don’t have an emergency fund or it’s not enough, then you could always take out a personal line of credit or loan to help you come up with the money you need for travel. These are better options compared to using your credit card, which is generally attached to costly fees.
If you need cash, a credit card isn’t the best choice for you, and that’s according to Greg McBride, bankrate.com’s chief financial analyst.
However, you still have to be cautious when you take out a personal line of credit or loan. Both could come with different terms and interest ratios and bear in mind that what you’ll borrow should be paid in due course.
Below are the factors you have to consider:
Personal Line of Credit
This is an effective safety net for people who have huge travel expenses or any other expenses that have piled up in front of them.
Like a credit card, a line of credit is open-ended. It’s a flexible borrowing system that allows you to decide how much you’ll borrow and when you’ll repay.
Because of this flexibility, a lot of people get in trouble by loaning a significant amount of cash. In a line of credit, you should only take what you need, then give it back at a specific period at a set interest rate.
Unless you have value or equity in something (mostly a home), you won’t be able to get a line of credit.
This option is an excellent way of getting cash, but don’t let it replace emergency funds and savings accounts. You should still be able to save for emergency purposes.
A line of credit should only be used if you’ve used up your emergency funds already. It’s the safest way to borrow. Don’t let it control the way you handle money.
Did you know that around 24 million Americans use personal loans?
It’s probably popular because you could get a lump sum of cash in advance, which is ideal for those who need money right away.
If you’re going to choose this option, do your best to get a low-interest rate so that you could still save money.
Taking out a personal loan is more low-cost than the 15% you’d be paying on a credit card, but that doesn’t mean you could get used to borrowing this way.
Whatever method you pick, it’s important to weigh the pros and cons, and only borrow what you need.
Still, despite these options, remember that it’s always better to save than borrow.