3 Reasons I'd Choose a Personal Loan Over a Credit Card Any Day

Although I've been a credit card user for many years, I've always paid my monthly balances in full, and I've never taken out a personal loan. And the reason is simple. I've yet to purchase something I couldn't pay for outright, other than a car or a house. I also make a point to maintain a decent emergency fund so I have money to tap in a pinch.

But there may come a point when I need to borrow money. If I find myself up against a massive home repair, for example, borrowing could be my only choice. But in that case, I'd turn to a personal loan over a credit card in a heartbeat. Here's why.

1. The interest rate would likely be much lower

The last time I checked my credit score, it was over 800. That's considered a really good score. And because of that, I'm likely to qualify for a competitive interest rate on a personal loan -- a rate that would most likely be far lower than what a credit card would charge me.

Of course, there is such a thing as a 0% interest credit card. Based on my credit score, I would likely qualify for one of those offers.

But those 0% interest credit cards only give you 0% interest for a limited period -- sometimes as little as a year. Meanwhile, if I'm looking at such a large expense that I need to borrow for it, then I'm not sure I'd be able to pay it off in a year. And once you're past your introductory period on a 0% credit card, your interest rate has the potential to skyrocket. So a personal loan seems like a safer bet either way.

2. My payments would be more predictable

Credit card interest tends to be variable, which means the interest rate you're paying on your balance can change with market conditions. With a personal loan, you get to lock in a fixed interest rate that results in predictable monthly payments.

I know myself, and the idea of having to factor a debt payment into my budget would no doubt be something I'd stress over. So I'd much prefer to have to deal with a payment that's set in stone.

3. My credit score wouldn't take a hit by virtue of having debt

Whenever you apply for a new loan or credit card, your credit score can take a small hit because a hard inquiry is performed. That might lower your score by five to 10 points, give or take.

Meanwhile, if you keep up with personal loan payments, it can reflect well on your credit score and even help it improve. But even if you make all of your credit card payments in a timely manner, your score can still take a hit by virtue of an increase in your credit utilization ratio.

Your credit utilization ratio speaks to how much of your revolving credit you're using at once, and it makes up 30% of your total credit score. When that ratio climbs above 30% (meaning, you're borrowing more than 30% of your total credit limit), your credit score can take a dive even if you make every single monthly payment on time. That's not something I would want.

I hope to always be in a position where my savings account balance is sufficient to cover unplanned bills. But if I ever have to borrow, I'd much rather turn to a personal loan than a credit card.