When it comes to handling an emergency expense—a sudden, unexpected cost or large purchase that needs immediate attention—should you use a personal loan or a credit card?

Ideally, you'd have an emergency fund ready for such situations. But if that’s not the case, deciding between a credit card or a quick personal loan can be important.

To start, consider whether you need a lump sum all at once or if this expense will be ongoing. Personal loans are generally straightforward to apply for, can be quickly approved, and provide a lump sum—whether it’s hundreds or thousands of dollars.

Credit cards, on the other hand, can be a flexible choice, especially if you’re able to manage the debt month-to-month. A cash advance option on a credit card allows you to draw only what’s needed at the time, but this comes with higher fees and interest.

One key advantage of personal loans is their typically lower interest rates compared to credit cards. Lower rates mean that you’re less likely to end up paying significantly more for the "gotcha" expense over time, which can help you avoid long-term budget strain. In contrast, a credit card may create a larger debt burden if the high-interest rate keeps the balance from shrinking quickly.

Credit cards do offer perks like points, travel benefits, and even 0% intro APR offers, which can be tempting for emergency expenses. However, personal loans provide the predictability of a fixed monthly payment and set repayment schedule, which can give peace of mind.

One potential downside of credit cards is that their interest rates are generally higher, and if you’re only paying the minimum, the balance can grow fast. If you’re not careful, you could end up near your credit limit before the emergency is fully paid off.

If you pay off your card monthly and have good credit, using it for unexpected costs could balance out the benefits—helping you earn rewards without falling into long-term debt.

In contrast, a personal loan’s fixed interest rate and predictable repayment schedule can help control the cost of an emergency expense. You know upfront what the monthly payment will be, and how long it will take to fully repay the loan.

Credit card interest rates also tend to be variable, which means they can change—and have been rising in recent years. Even if rates decrease in the future, they generally start higher than personal loan rates, so you’re likely to pay more in interest over time with a credit card, especially if you’re eligible for a good rate on a personal loan.

Credit cards may also carry additional fees, such as annual fees, while personal loans generally don’t, although some come with origination fees.

Both credit cards and personal loans are typically unsecured, meaning you don’t need to back them with collateral, especially if you have good credit. If you choose a secured loan backed by savings or a car, you might get an even lower rate but risk losing the collateral if you default.

Ultimately, your decision should factor in your credit score, current debt level, and credit history. A credit card might work if you can manage the extra monthly payment without accumulating too much interest. However, a personal loan might be better if you want a lump sum at a low rate with predictable terms.

Some lenders even offer personal loans to those with less-than-perfect credit, though rates may be higher.

In summary, aim to avoid high-interest debt, leverage your best APR credit card if you choose that option, and be selective in choosing a loan or credit provider. Protect your credit profile by managing debt carefully and shopping for the best terms.

Paraphrasing text from "Yahoo Finance" all rights reserved by the original author.