Having confusion about whether to go for a personal loan or a credit card loan, here are some points mentioned based on which you can decide what to opt for. Personal loans and credit cards both allow you to borrow money and share many of the same fundamental credit parameters. Loan and credit card agreements often include money loaned at a fixed interest rate, monthly payments that include principal and interest, late penalties, underwriting criteria, quantity limitations, and other terms and conditions. Mishandling any form of credit can harm your credit report, making it difficult to get loans and find work.
The very major difference between personal loans and credit cards is that a credit card loan is a pre-approved loan. The bank has access to all of your personal and financial information as the issuer already has a credit card. As a result, credit card loans do not require any special documents and are thus called pre-approved. However, on the other side, personal loans require approval which is provided based on the required set of documentation and some eligibility factors. Below mentioned are some of the other differences between credit cards and personal loans.
BASIS OF FACTORS
1. Purpose
Credit card loans are borrowed for fulfilling smaller expenses
Personal Loan are suitable for comparatively larger amounts.
2. Amount of Loan
Credit card loans are appropriate when the issuer wants to borrow money for smaller expenses.
Personal loans are suitable for comparatively larger amounts.
3. Application process
No documentation is required in credit card loan as the bank already has the necessary details
A set of required documentation is compulsory for the verification and approval of a personal loan.
4. Duration of loan
Credit Card loans have shorter loan terms.
Personal loans are for a longer tenure.
5. Maximum Amount that can be availed
The maximum amount of credit card loan that can be issued depends solely on the predetermined credit card limit.
The maximum loan amount of personal loan depends on the lender and the income of the applicant.
6. Extra expenses
Credit card loans do not contain any additional expenses other than interest charges.
Personal loans have many extra charges such as processing fees, GST charges, and other hidden charges.
7. Eligibility
Only credit cardholders can apply for credit card loans.
Anyone who wants to apply for a personal loan, having certain eligibility factors, can apply.
8. Approval time
Credit card loans can be approved within 24 hours of applying.
A personal loan generally takes up to 3-5 working days.
9. Loan tenure
The credit card loan tenure is generally upto 45 days.
Personal loan tenure is usually from one to five years.
10. Repayment
The repayment of credit card loan is scheduled at the end of the credit term period.
The repayment of personal loan is done in the form of fixed EMI’s.
11. Disbursement of the loan amount
The credit card loan amount is transferred directly to the issuer’s bank account.
The personal loan amount is paid as a lump sum to the applicant.
Not all credit is created equal. Personal loans and credit cards can have a wide range of conditions and terms.Personal loans have lower interest rates than credit cards, but they must be paid back in installments. Credit cards provide constant access to cash, and interest is only charged on outstanding sums that are not paid off on time. Before you decide to take out a loan, whether it is a credit card loan or a personal loan, you should assess your financial needs and your capacity to repay the amount.
Whether you pick one or both, your credit score is very crucial to obtain approval. If the applicant only needs a modest amount of money, he can apply for a credit card to fulfill his minor money requirements and a credit card loan will be an ideal alternative. In the event of a personal loan, a personal loan calculator will help you understand how your credit score affects your monthly payments.
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