Personal loan vs Credit Card Loan

Financial crisis can overtake a scenario at any moment, and sometimes without any warnings. Likewise, it had been tough not only mentally but financially as well since the pandemic lockdown had overtaken and changed the normal scenario of the entire society. At these times of need, these kinds of unsecured loans (personal loan and credit card loan) have been financial aid.

A credit card loan is related to the facilities of availing a credit card, which can be availed during a time of emergency. Credit card users can avail of a loan within the credit card limit that had been set on the credit card beforehand. Further, it allows the user to spend the cash credited over purchases with the help of a payment card. The card can be used for any kind of purchase until and unless the credit card limit is not crossed. The loan that has been credited with the help of a credit card facility has to be repaid with interest. A credit card could be a good option to enhance one’s CIBIL score if re-payments are done within the due date, which can prove to be beneficial to apply for other loans.

A credit card loan is of help where there is a need for urgent cash and can be availed only by existing credit card users. They can borrow a loan only up to the limit that has already been set on their card. This means that a credit card user can avail the opportunity of a loan amount concerning an extended credit card limit or can even use an unused credit card to get a loan credited during a time of crisis. In the case of a credit loan, options are available for or a pre-approved loan, as the applicant is an existing user. But just like any other loan the credit borrowed has to be returned, with added interest. These payments can be deposited on monthly EMI installments.

Personal comes with a range of flexibility, which means the amount credited can be used for various purposes without needing to inform the lender about it. One can use the cash for uplifting one’s business background, where another can utilize the credit to help his/ her family to lead a better life. This scheme of loans provides a maximum credit amount of 75 lakh and a tenure period of 5 years at maximum to repay the credit borrowed. Moreover, personal loans offer a low-interest rate as compared to credit loans. One can avail HDFC personal loan to avail all these facilities.

Further, we will take a look at a few things so as to compare the facility of credit card loans with that of personal loans:

• Approval- 
  
  An individual already having a credit card and an existing record of credit payments, then he or she can avail of a pre-approved credit card loan. While in the case of a personal loan, a borrower can only have the benefit of a pre-approved personal loan if he/ she has a pre-existing account in a particular financial institution.

• Documentation- 
  
  Though the documentation required while applying for a personal loan is not a lot, still, credit card loans take less time in the procedure of documentation.

• Interest rate- 
  
  Interests charged on personal loans are comparatively less than that of a credit card loan. The interest rates of a credit card loan can shoot up to 33% approximately.

• Loan tenure- 
  
  Credit card loans have a short tenure, thus it might not be suitable for a long term loan, whereas personal loans can be way suitable for long term loans, under the facilities they provide.

On a concluding note, to choose between a personal loan and a credit card loan depends on various things, but mainly on your circumstances and what kind of facilities, you would want to avail. Both these finance systems have their own set of benefits and also carry some demerits along with them. Thus you need to do your market survey, as you compare various markets of personal loans and credit card loans.

 

Also Read This-Personal loan tenure and EMI Analysis