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Credit Card Loan Vs Personal Loan: Which to Choose?

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Credit Card Loan Vs Personal Loan: Which to Choose?

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When it comes to borrowing money, there are a variety of options available to you. Two popular options are credit card loans and personal loans. Both have their own set of advantages and disadvantages, and the right choice for you will depend on your specific financial situation and needs. 

Credit card loans are typically easier to obtain, but they often come with higher interest rates. Personal loans, on the other hand, may have lower interest rates, but they may be more difficult to qualify for. It's important to carefully consider both options and determine which one is the best fit for you.

What is a credit card loan?

A credit card is used to make purchases which can be paid later. A credit card loan is a pre-approved loan offered by the issuer whose credit card you already use and is based on the existing credit limit that has been allocated to you.

What is a personal loan?

A personal loan is an unsecured loan that can be used for diverse purposes like higher education, buying an appliance, sponsoring your vacation, paying medical bills, funding your vacation, etc. It is easy to get and comes with a flexible repayment tenure that often ranges from 12 to 60 months.

Credit card loans vs Personal loans: Key Differences

Now that you know the high-level definitions of each, let us take a look at the key differences between a personal loan vs a credit card loan.

Summing it up

As you can see, in the comparison of credit card loans vs personal loans - there is no clear winner. A credit card allows you to pay bills, purchase items, and pay for them later. On the other hand, if you require a larger amount, then a personal loan is the right way to go. Since both are unsecured loans, personal loans come with a slightly higher rate of interest. However, they also come with a longer repayment tenor that helps keep your monthly EMI manageable.

Frequently Asked Questions

1. Are personal loans better than credit cards?

‘Better’ is defined by your own specific requirements. If your need is of a higher amount, then a personal loan is better. If your need for cash is immediate and you can not wait even a few days, then a credit card loan may be right for you.

2. Is it worth taking a loan on a credit card?

If your need is of an amount in the range of ₹25K to ₹2.5L and it is urgent, then a credit card loan might be the apt choice for you. It has a reasonable rate of interest that will not pinch you too much. However, do note that the repayment window is usually low and you must be in a position to pay your EMIs on time to avoid late charges and other penalties.

3. How does a credit card loan differ from a personal loan?

A credit card loan is a pre-approved loan that requires no formal application process or additional documents to support it. It is almost instantly approved and immediately disbursed making it one of the fastest types of credit products in the market. On the other hand, personal loans take more time comparatively and are taken for much larger amounts that can be conveniently repaid over the next 4-5 years. 

Curious? Read more!

1. Difference between loan and credit, explained

2. Loan on Credit Card - Features, Eligibility and More

3.What is Credit Card EMI & How Does it Work?

4. What is a Credit Card? Things You Need to Know Before You Own

5. What is a Credit Score? How to Check it

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