When we lack the finances to afford all our expenses, many of us will turn to borrowing – but which credit product should you use? A credit card or a personal loan or personal finance? Before making a final decision, determine how much you wish to borrow, for how long and how you intend to repay. Once you have considered these factors, deciding whether to use a credit card or a personal loan or finance becomes easier.

Credit cards: A short-term, flexible borrowing solution

Credit cards help eliminate the burden of unexpected events. They are generally a more flexible form of payment, as you can choose how much you wish to pay back each month – and paying off more every month can significantly decrease the cost of your borrowing. As a result, credit cards can be considered for a short-term flexible solution compared to a personal loan.

With credit cards, you also have the option to switch your outstanding balance to other credit cards with zero percent interest for three, six or 12 months. This means you can pay off the amount you owe within a fixed period and without paying more on interest. However, switching could also mean paying a processing fee on your balance transfer so, if you don’t end up paying the transferred balance within the agreed period, you might end up paying more fees and charges on this service.

Before deciding which credit card to take, you should also compare all the available options in the market and pick the one which suits your needs.

[Compare credit cards in the UAE | Compare credit cards in Saudi Arabia]

Personal loans and personal finance: A longer-term, fixed borrowing solution

Unlike credit cards, personal loans or personal finance are a long-term borrowing option and hence can take several years to pay back – and the repayments must be paid in full each month. This form of borrowing is ideal for big purchases, and for people who wish to know the exact amount they will be paying back each month as well as the precise length of their debt.

Another thing to keep in mind is that the longer you take to pay off the debt, the more money you give to the bank in the form of interest. Nevertheless, getting a personal loan or personal finance removes the temptation of only paying the minimum payment on a credit card or letting you to spend “just that little bit extra” each month.

A good tip to remember is that, just like credit cards, when getting a personal loan or personal finance you should always shop around for the best deals available and compare it with one another, instead of settling for the one offered only by your bank.

[Compare personal loans in the UAE | Compare personal finance in Saudi Arabia]

No matter which form of credit you decide to pick up, make sure that you can afford to pay back your expenses to avoid putting yourself in a debt spiral. Do not be late with your repayment and try, as much as you can, to pay off your credit card balance in full.