Credit Card VS Personal Loan
If you’re unclear whether you should take out a personal loan or a credit card loan, examine the following points. Both personal loans and credit cards allow you to borrow money and have many of the same basic credit requirements. Personal loan interest rate are affordable rather than the fines incurred on a credit card. Money borrowed at a fixed interest rate, repayments that include principal and interest, late fees, qualifying criteria, amount restrictions, and other terms and conditions are common in loan and credit card agreements. Misusing credit in any way can lower your credit score, making it more difficult to get loans and find work.
What is the distinction between a credit card and a personal loan?
A credit card loan is a pre-approved loan, which is the most significant distinction between personal loans and credit cards. As the borrower already has a credit card, the lender has all of your personal and financial information. As a result, credit card loans are referred to as pre-approved because no specific documents are required. Personal loans, on the other hand, require approval, which is granted based on the relevant documentation and some qualifying criteria. There are more points on what are the differences between a credit card and a personal loan, that are mentioned below-
Purpose
Credit card loans are used to cover minor bills.
Personal loans are more suitable for greater amounts.
The Loan Amount
When the issuer needs to borrow money for modest purposes, credit card loans are the best option.
Personal loans are more suitable for greater amounts.
The application procedure
Credit cards do not require any documentation because the bank already has all of the necessary information.
For the verification and approval of a personal loan, a set of required papers is required.
Term of the loan
The terms of credit card loans are shorter.
Personal loans have a repayment period that is comparatively longer.
Maximum amount of money available
The maximum credit card amount that can be issued to the borrower depends on the particular credit card limit.
The maximum personal loan amount is determined by the lender and the applicant’s income.
Additional costs
Apart from interest rates, credit card loans do not have any additional costs.
Processing fees, GST charges, and other hidden expenses are all included in personal loans.
Eligibility
Credit card loans are only available to credit card holders.
Anyone who meets certain criteria and needs a personal loan is eligible.
Time for approval
Credit card loans can be approved in a short period of 24 hours.
A personal loan can take up to 3-5 days to process.
Loan duration
The term of a credit card loan is usually 45 days.
The repayment term of a personal loan is generally one to five years and can also extend to 6 years.
Repayment
The credit card repayment is set at the end of the credit term.
Personal loans are repaid through regular monthly installments.
The loan amount disbursement
The credit card balance is directly transferred to the issuer’s bank account.
The applicant receives a lump sum payment for the personal loan.
The Bottom Line
Credit is not created equal. Personal loans and credit cards can come with a variety of terms and restrictions. Although instant personal loan offer lower interest rates than credit cards, they must be repaid in installments. Credit cards give you instant access to cash, and interest is only levied if you don’t pay off your balance on time. Before you take out a loan, whether it’s a credit card loan or a personal loan, you should evaluate your financial needs and repayment capacity.
