As a credit union member, you have borrowing options. Two popular choices for emergency funding are personal loans and credit cards.

Here are several pros and cons to each.

1.) Limits.

Credit cards have credit limits in the thousands, enough to cover a small emergency. The value of credit cards is their convenience.  There’s no need for a new loan each time you incur an expense.

Your personal-loan approval amount depends on several factors: income, credit score and other assets. For borrowers with good credit history and a strong ability to repay, these loans could be $50,000.

2.) Repayment options.

Credit card repayment is handled monthly. A minimum payment option is available and no fixed term to repayment.  If you continue charging and only pay the minimum, paying off your loan can take forever.

In contrast, a personal loan includes a fixed monthly fee. This lets you repay the loan in a set amount of time. It’s amortized so you’re making equal payments of both interest and principal over the loan’s life. There’s also no penalty for early repayment.

3.) Usability

The usability of credit cards is limited. You can’t charge a credit card and get cashback.

A personal loan, on the other hand, is deposited directly into your draft account. You can withdraw it as cash, write checks or use auto draft features.

Another benefit of a personal loan is many businesses offer a cash discount.  Businesses must pay for processing fees and therefore prefer cash. If you’re paying a hospital, they may also accept a lower fee if you pay cash.

4.) Interest rates

Credit card interest rates can be high; the global average is 15%. Some credit cards fluctuate their interest rates based on the prime interest rate.  Credit card companies can also alter your rate if your credit score changes dramatically.  This can make it difficult to plan your financial future.

A personal loan has a fixed interest rate that never increases if you don’t miss a payment. You can make a future budget that involves paying a fixed amount over approximately five years.

Interest rates on personal loans are usually lower than on credit cards. For people with average credit, interest rates can be 5% lower; for those with better credit, it can be even lower.