It’s a debate every financially mature person is going to run up against sooner or later. Do I take out a personal loan or apply for a credit card? While to people new to managing debt it can seem like both are an equal choice, they couldn’t be more different. It’s more than apples and oranges, it’s apples and pumpkins – not only are they completely different, you use them in completely different way. Read on to find out more.

Flexibility and freedom

What the credit card does better than anything else is lots of little purchases. If you run a household and frequently need to pick up things here and there, or you operate a business where you constantly need to be maintain a supply of every product, this can be the thing for you. While it’s important to understand the limits of the card, it won’t deplete as rapidly or in the same way as a loan, which is a fixed amount of money.

Watch out, however – it’s important to pay down your credit card debt as quickly as possible to avoid it compounding. All too often we hear about people getting caught in the credit card trap, being unable to make more than the minimal repayments can see your credit rating begin to fall, potentially affecting your ability to apply for a mortgage or a car loan through a bank or financial institution. With some discipline and some careful budgeting, you’ll be able to avoid these pitfalls, but it’s always prudent to be aware of the risks.

The smart, targeted choice

A personal loan is ideal if you’re looking to go after a set, discrete item or series of items. If you’re looking to upgrade the plant and equipment in your business, or furnish your household with a new lounge set, this is the product for you.

Its fixed nature does require that you put in a bit of thought before making your application, which means your research has to be done in advance – no simply walking into the shop and browsing. You’ll have to figure out what you need, then price the product in advance of making your loan application to ensure that you get precisely what you need – not falling short or leaving money on the table.

If you’d like to find out how a personal loan can be used to your advantage, speak to the loan consultants at Fast Money today.