When we are standing face to face with financial difficulty at that time all we can think of is running away from that place as fast as we can. We look for all the possible and feasible options. In such time we are so occupied with problems that we need a quick way out of it. The options that we generally come up with are personal loans and credit cards. Most of us are inclined more towards credit cards thinking that it is an easy way out without even giving it a second thought. A lot of us go for a personal loan as well but again we do not think it through. It is well said that we should not take any major decisions while dealing with a crisis in life.
Personal loans are collateral-free loans given by banks and NBFC (Non-Banking Financial Companies) to support you financially and help you meet your personal needs. Personal loans have a straightforward application process. The documents required are basic identity proof, income proof, and residential proof. The maximum personal loan amount you can get is fifty lacs. The repayment schedule is finalized based on your capacity. The personal loan interest rates are comparatively lower than the credit card interest rates.
You can easily get an HDFC personal loan policy at a personal loan interest rate starting from 10.75% per annum and with flexible terms and conditions.
Whereas, a credit card is just like your normal ATM/debit card. The only difference here is that a credit card allows you to expend money even when you do not have any balance in your bank account. A financial institution issues a credit card based on the credit score and allows a pre-approved limit up to which you can borrow money. The maximum limit for a credit card is just five lacs (which may differ from banks and non-banking financial companies). The repayment structure of credit cards is rigid. The interest rate levied by institutions on a credit card transaction is exorbitant. In exchange for immediate funds, the institutions charge a lot from you.
HDFC bank provides a credit card facility with an interest rate of 41.88% per annum.
For a credit card, you just have to go through the paperwork once and you can enjoy the readily available funds at any point in time. With a personal loan, paperwork has to be done every time you want a loan but the cost of getting a personal loan is very less as compared to the cost of credit cards.
Readily available funds or saving in terms of cost, it depends on your preference and needs. If you want hassle-free funds at a low cost it is advisable to go for a personal loan
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