When faced with emergency expenses, your first instinct might be to slap them on a credit card. After all, many people already have one so it’s just a matter of pulling it out and using it.

Still, you may wonder whether this is your best choice. While it may be convenient when you’re in an unexpected situation, will it cost you more overall? Could the easiest solution also affect your credit negatively? Let’s compare the two so you can decide for yourself.

What Constitutes an Emergency?

First, we want to define an emergency. While this really depends on you, the dictionary definition is “a serious, unexpected, and often dangerous situation requiring immediate action.”

Yet, immediate action doesn’t necessarily mean you need immediate money. You will probably need to call a professional to deal with the situation now, but you usually don’t need the money in minutes. You just need the money quickly.

Even if you do need money immediately, both installment loans and credit cards can provide quick cash. Some lenders provide funds within hours that can handle the following common emergency expenses.

Home Repairs

If your roof springs a leak or your hot water tank blows, you’ll need to hire someone to fix or replace them. Get an estimate for the work and then choose the best way to handle these emergency expenses, instead of thinking you must use a credit card.

Car Repairs

When your car breaks down and you need it for work, you must get it back on the road as soon as possible. Still, you will want to an estimate. Once you have it, it will take time for the mechanic to fix your vehicle. In the meantime, you can arrange financing.

Personal Tragedies

If a friend of family member becomes seriously ill or dies, you may want to travel to be by their bedside or to attend their funeral. Even though these situations can occur suddenly, you will probably need a day or two to get organized and to estimate costs. In the meantime, you can choose the best way to handle these emergency expenses.

As you can see, emergencies seldom require instant money, but they do require fast funds. Let’s compare installment loans and credit cards on this point.

Fastest Funds

Credit cards do provide fast funds, but not everyone has one. Even if they do, that doesn’t mean it is their best choice.

Good installment loans offer a very fast application and approval process and a fast funds release. Some lenders can put money in your bank account within hours.

Since most situations seldom require instant cash, online installment loans are often a better choice. You don’t have to face a complicated process like a bank or credit union, and you can check your loan eligibility instantly. This is especially helpful if you have bad credit.

Maximum Amount

Credit cards rarely offer a limit of more than a few thousand dollars. If you’re faced with a big bill for things such as a roof replacement, that’s not going to cut it.

Luckily, installment loans for emergency expenses offer much more. The amount you can borrow depends on the lender and your financial situation, but you can easily find installment loans in amounts ranging from hundreds to tens of thousands of dollars.

Best Interest Rate

Naturally, you want to pay the least amount of interest. Regrettably, credit cards almost always have higher interest rates than installment loans.

Of course, there are exceptions. For instance, those with excellent credit may qualify for low interest credit cards. Those with poor credit may also pay more for on an installment loan through some lenders.

Nonetheless, the average interest rate on a credit card in the U.S. is 28.72% at the moment. Interest rates on credit cards are also tied to the prime rate, so they can increase at any time.

Compare that to the average interest rate on an installment loan of 12.43%. That’s a huge difference and the interest rate on almost all installment loans remains fixed throughout the repayment term.

Preferred Way to Calculate Interest

This is something credit card companies seldom talk about. The way they calculate the interest you pay is very different on a credit card when compared to installment loans. What’s worse is the method used doesn’t work in your favor.

Credit cards use compound interest. If you do not pay off your entire balance, interest accumulates on what remains. The credit company adds this interest onto your remaining balance and you pay interest on it again next month. If you don’t pay off your balance that month, the cycle repeats and you pay interest on the amount again. That’s what makes compound interest such a problem. It makes it very hard to pay off debt.

Compare this to installment loans. They use simple interest. The lender calculates the total interest you owe based on the amount you borrow and the interest rate. They divide this amount between your payments. Every time you pay a portion goes towards the principal amount of the loan and the interest that you owe. Interest does not accumulate on the unpaid balance, making it easier to pay off your debt.

Easiest Repayment Method

It is easy to accumulate credit card debt since you always have credit available to you, providing you make your minimum payments on time. Still, this access to credit also makes it very easy to lose track of how much time and effort it will to repay what you owe. Add emergency expenses into the mix and repayment can become almost impossible.

Fortunately, this isn’t how installment loans work. They have regular fixed payments with a set loan end date. If you need to borrow for emergency expenses, you know exactly when you’ll be debt-free.

So, installment loans are a stable choice when compared to credit cards, which makes it easier to manage your debt. Good installment loan lenders also offer a fee-free experience, competitive interest rates, and the option to pay more at any time, without penalty.

Most Flexible Payment Options

Yes, credit cards are flexible. However, making minimum payments isn’t going to cut. You need to pay off your credit card balance quickly, otherwise interest compounds. The obvious issue is that you probably don’t have large amounts of money on hand, or you wouldn’t have borrowed in the first place.

Luckily, when you choose an installment loan you can choose how long you want to take to repay what you’ve borrowed. This gives you payment flexibility, since longer terms have lower payments and shorter terms have higher ones.

Installment loan terms can range between 6 months and many years, making it ease to find a payment amount that works with your budget.

Most Accessible

If you have a credit card you may be able to take out a cash advance for emergency expenses from the nearest ATM. Beware though. Cash advances accumulate interest from the moment you take the money out and you will pay a much higher interest rate too.

Fortunately, even if you don’t have a credit card you can probably get an installment loan for emergency expenses, regardless of your credit scores. Online lenders also make borrowing fast and easy. Plus, taking out an installment loan could bolster your credit if you handle your payments well.

Positive Impact on Credit

Your credit card utilization ratio measures how much of your total revolving credit you have used compared to your limits. If you increase what you owe due to emergency expenses, your CCU will go up. A high ratio can lower your credit scores. Experts suggest it should be below 30%. Otherwise, it will definitely negatively impact your credit worthiness.

Luckily, CCU doesn’t factor into installment loans. Choose the right installment loan broker and you can review your online borrowing options without affecting your credit scores. Don’t try this through mainstream lenders though. Each application can lower your credit scores.

FlexMoney Provides Access to Installment Loans for Emergency Expenses

You can get installment loans for emergency expenses from in-person and online sources. By far, online lending is the fastest and easiest to access.

FlexMoney provides a simplified online application and approval process that can also get money into your bank account quickly. There’s no need to resort to expensive credit card advances or payday loans.

Have questions? No problem. We offer an extensive help section on our website. You can also call our toll-free number if you prefer to connect with a person or feel free to email us with your concerns.

FlexMoney USA provides access to a network of reputable U.S. lenders offering loans ranging between $200 and $35,000. Our process does not lower your credit scores, but it does make it very simple to find out what’s available to you in minutes.

Start your loan application here and get the money you need to handle emergency expenses now. Why make things complicated and expensive when borrowing can be simple and affordable?