To get instant funds, you have two options: a personal loan or a credit card loan. Whichever option you choose, both avenues will give you easy access to cash. Whatever your goal is, you should pick your options wisely. Professionals recommend taking a credit card loan for short-term needs and a personal loan for those needing more repayment to clear out the debt. That said, it narrows down to the interest rate you need to pay. Whether you choose a personal or a credit card loan, the basic task is to get the loan which gets you the lowest options to cater to your requirements.
Personal loan vs Credit card
Usually, a personal loan is sanctioned for a specific time between one to five years, payable in the form of EMIs, including the principal and interest. A personal loan is quickly approved for salaried people compared to self-employed individuals.
Credit card loans, also called revolving debt, are borrowed based on the balance left at the end of the billing period.
How do credit cards work?
A credit card is a handy option whether you need to make a big or small expense. The best credit card in India helps you purchase physically in-store and online as well. But there is a drawback to a credit card. When you shop irrationally with your card and fail to pay off the balance in the monthly billing tenure, you are charged with a high-interest rate on the unpaid amount.
The fundamental reason it happens is that credit companies don’t ask you to pay off all the balance in one go. Using the Minimum Amount Due plan, you can keep using your card and exhaust the leftover funds. But, in the backend, the interest keeps accumulating. A higher APR leads to higher interest accumulations.
However, the loan procedure is simple here, and the borrowed amount equals the amount you spent on the card. Usually, credit card loans are unsecured and don’t need collateral.
Benefits of credit card loan
- You can apply for this loan anytime without any documentation or procedure.
- A good credit rating makes you eligible to apply for a loan.
- You don’t need to be physically present at a bank to apply for the loan.
- You can choose the option of 0% interest for a repayment tenure.
Drawbacks of credit card loans
- The interest rate can be high according to the card’s APR.
- It comes with additional fees, such as over-the-limit and late and annual fees.
- Your CIBIL score should be elevated enough to apply for the best credit card loan with a minimal interest rate.
When should you use a credit card?
Considering the pros and cons, using a credit card loan is suggested only when you have an immediate money requirement. And, sure, you can clear off the balance in the given billing cycle.
When does a personal loan work for you?
Personal loans are good when you need control over your repayment. Dissimilar to credit cards, they are simpler to avail with a limited eligibility criterion. You can pick the type of personal loan suitable for you according to your profile, requirements, and qualification.
When personal and credit card loans are compared, the significant difference is that you get a full-fledged amount with a personal loan, which is not possible with a credit card loan.
Benefits of personal loans
- The eligibility criteria for personal loans are not rigid, like a credit card.
- You can get a loan at a low-interest rate.
- It is recommended when you need a lump sum of money upfront.
- You can apply for a personal loan offline or online
- The amount is disbursed to your bank account as soon as your documents get verified.
Drawbacks of personal loan
- You have to pay the loan amount in the given fixed payment schedule.
- Your credit score should be high to get a low-interest rate on a personal loan.
When should you use a personal loan?
When you understand your financial condition well, a personal loan is a good way. It is a better option for those who need a loan for longer and has to make multiple cash payments.
Credit card loan vs Personal loan- what should you go for?
Considering the overall perspective, both credit cards and personal loans are good options. While you can borrow funds and make payments, the interest rates should be considered here. Do a comparative study of both loans, along with their interest rates and your requirements and then proceed.
This is a tough call to make, but by considering your needs, perspective, and circumstances, you can pick a clear winner. So, assess your situation efficiently and make a good decision.