When you’re in need of cash, you have the option of taking out a personal loan or paying it off with a credit card loan. Regardless of the path you take, the money will be available to you very immediately.
For short-term debt, it makes more sense in taking out a credit card loan. A personal loan, on the other hand, is better for people who require a longer payback period to pay off their debt. Hence, it all comes down to the interest rate that you would have to pay in the tenure of your loan. So, whether you’re looking for a personal loan or a credit card loan, your priority should be to discover the least expensive alternative that meets your demands. So, let’s look at how you can make a choice between the two.
What is a Personal Loan?
A personal loan is an unsecured loan used for a variety of reasons, including medical expenses, large purchases, vacations, and even debt consolidation. Personal loans have a high interest rate since they are unsecured loans.
What is a Credit Card Loan?
A credit card loan is a pre-approved loan that doesn’t require any paperwork. It is the quickest way to get unsecured credit. A portion of your credit card limit that has not been used is given as a loan in this sort of loan. A credit card loan is not the same as a cash withdrawal.
Picking between Credit Card Loan & Personal Loan:
| Feature | Personal Loan | Credit Card Loan |
| When to Avail | For long-term & higher loan amount such as medical expenses, children’s education, wedding, international travel, home renovation etc. | Preferable for a short-term and small loan amount for business or personal needs |
| How to borrow | By applying to a bank or financial institution with documentation | By using credit card in-store or online |
| Disbursement | Amount paid as lumpsum to the customer | Paid directly to the merchant on card swipe |
| Repayment | As EMIs to the bank for a specified tenure | Paid by customer at the end of credit period |
| Documentation | Proof of birth, KYC, bank statements etc. all are required | Minimum documentation required |
| Borrowing limit | Can be availed for higher loan amounts (upto ₹75 Lakh) based on your eligibility | Is predetermined monthly by your credit limit |
| Interest rates | The rate of interest on a personal loan is higher than the loan against credit cards | The rate of interest on credit cards is comparatively lower than personal loans |
In Conclusion:
Both funding solutions have their respective advantages and disadvantages. Finding the best credit option is entirely dependent on one’s financial status & the type of requirement. Also, while choosing between the two, repayment capability is an important element to consider. Both personal loans and credit card loans can be beneficial and inexpensive if handled properly, but if not, any financial help can quickly become unaffordable. So, choose wisely & conduct a thorough market research before taking financial assistance.