Personal Loan or Credit Card Loan - Which is Better for You?

[Andritha Agarwal]

A personal loan and credit card loan both are the forms of multipurpose loans. Both loans are unsecured loans and can be used for almost the same purposes. So when an emergency knocks at your door and leaves you in a shortage of fund, the dilemma of choosing between a credit card loan and a personal loan becomes so difficult. In order to make you confident in your selection between the above-mentioned loans, today we are going to draw a comparison between a personal loan and a credit card loan.

What Is a Credit Card?
A credit card is a form of a pre-approved loan. No documentation is required in availing such loans. This is the fastest way of availing cash during urgency. Credit card loan is slightly different from cash withdrawal from your savings account. You can get a loan of a certain amount which is unused in your credit card.

What Is a Personal Loan?
Personal loans which are presently upgraded to loans online are the unsecured and multipurpose loans. Such loans are easily available with any bank or NBFC. The credit score of the loan seeker plays a vital role in sanctioning and interest rate of the loan.

Difference between a Credit Card Loan and a Personal Loan
The personal loan comes in a lump sum amount. Personal loan amount and tenure are predetermined by the borrower. The tenure of a personal loan is usually between one and seven years. With a personal loan, you are obliged to pay interest, application, origination, monthly or prepayment fees.

Credit cards have no fixed tenure to repay the loan taken so they can theoretically last a lifetime. There’s a limit on how much you can borrow each month and you have to make at least a minimum monthly payment on your balance. Most of the credit cards charge annual fees but also come with interest-free grace periods, balance transfers and rewards option.

When to Consider a Credit Card

A credit card is the best for the fastest cash availability. With a credit card, you can get instant cash in hand whenever you need.

Credit card loans are a kind of loan where no documentation is needed. So if you want to avoid the process of application, documentation, approval of loan than credit card works best for you.

Personal loans have many criteria which you need to fulfil. If you find that you are not eligible for a personal loan you can still get a loan with a credit card.

Credit card loans are the best when you want to have a small amount of money for purchasing things of your wish or want to have monthly expenses. The repayment procedure is flexible here so you can pay any amount that suited your budget in that particular month.

When to Consider a Personal Loan

If your expense is larger than a personal loan is better than a credit card loan. If you need an amount of ₹ 50,000 or more than you can get personal loan online very easily. Expenditure of a marriage, financing a small business, pursuing higher education, home renovation, medical expenses such big expenses can be covered with personal loans at an ease.

Personal loans are generally a kind of unsecured loan but if you are having some valuables or property then you can even make it secured with your valuables. With a secured personal loan you can enjoy the lower interest rate.

Either your personal online loans are secured or not but it is certain that the interest rate is going to be much lower as compared to a credit card. The personal loan interest rate ranges from 11% to 24%. Whereas the interest rate a credit card annually can reach up to 40%.

If you want to make yourself economically stable than a personal loan is the best for you. A personal loan repayment comes in EMIs so you will be regular in repayment and can be more economically organized.

The Bottom Line

The choice between a credit card loan and a personal loan highly depends on the amount you need and your cash flow. If you are wanting a huge amount of money that personal loan is a better option as you can repay it over the time in equated monthly investment without any financial burden on you. You can apply for a personal loan online today and get it disbursed within 24 hours. But if you need a smaller amount of money and pretty sure about the sooner repayment that a credit card loan will be beneficial for any borrower.