How To Pick The Perfect Payment Method For Your Purchase

Personal Loan

It’s recommended that you use a personal loan for larger purchases

Low interest rate/APR.

Set end date and amount pay back (With a credit card there is revolving interest and no end date).

Fixed monthly payments.

Better for your credit rating.

Useful for purchases like roof replacement and HVAC.

Check out more ways you can use a personal loan.

Revolving debt is much more damaging for your credit score than installment loans due to the “revolving utilization” ratio that the credit bureau looks at. That is because personal loans have fixed monthly payments that you agree to when you take the loan. To learn more about credit utilization, click HERE.

Credit Card

It’s recommended that use a credit card with smaller purchases

Does not impact your credit like a large purchase would. (Unless you intend to pay it off by your next statement).

Pay 0% interest by paying off your balance each month.

Creates a “credit mix.” Having both installment and revolving credit shows lenders you can manage different types of credit accounts. 

Learn how credit card interest rates work HERE.

Savings

It’s recommended that you use your savings for emergencies

You reach the amount for a specific purchase you’ve been saving for. Example: You have saved $2,000 for vacation. You set this money aside for vacation so use the funds for that.

True emergencies (car repair, vet emergency, medical bills, etc.)

Do NOT use savings for paying off debt or making large purchases. If you deplete your emergency fun and an actual emergency arises then you may have to rely on credit cards. This in time will increase your debt and lower your credit score.

If you’re unsure of which route you should take for your next purchase, reach out to Launch CU and speak with one of our member service representatives.