Personal Loan Vs Credit Card: When is it better to use a credit card and when is it wise to take a personal loan? Understand here..
Personal Loan Vs Credit Card: If you suddenly need money and are unable to arrange the money from anywhere, then you have two better options, credit card and personal loan. Credit cards and personal loans, both are unsecured loans. It is wise to use credit cards in many places, but in many places, it is better to meet the need for money by taking a personal loan instead of a credit card in an emergency. But how to understand when it is wise to use a credit card and when it is wise to use a personal loan? Here know the difference between personal loan and credit cards and their different uses.
It is not necessary to be a bank customer to get a credit card.
In the case of taking a loan from a credit card, you don't need to be a customer of that bank, whereas if you want to take a personal loan, then it is very important to have an account in that bank. Only then can you apply for a personal loan.
You can take loans again and again from a credit card.
A big difference between a credit card and a personal loan is that after paying the loan amount on a credit card, you become eligible to take a new loan again from the same credit card i.e. you can use a credit card to take a loan again and again. However, this is not the case with personal loans. After taking a personal loan, if you want to take a personal loan again, then you will have to apply for it again. At that time your credit score will be seen once again and all the parameters will be tested. If your CIBIL score is good, then you will easily get the loan again and its interest rate may also seem low. But if the credit score is not good, then it may be difficult to get a personal loan again. Apart from this, taking personal loans again and again also has a bad effect on your CIBIL score.
A grace period is not available in personal loans.
The use of credit cards has increased rapidly in recent times because you get a grace period of some time to repay the loan. If the loan is repaid in this grace period, then the loan amount can be returned without interest. You do not get this option with a personal loan. After taking a personal loan, you have to pay EMI along with interest from the next month itself.
No need for too many formalities for credit card
To take a personal loan, you have to give some important documents to the bank. The parameters of your salary etc. are examined. Only after this, your loan is approved. Whereas, too many formalities are not required for credit cards.
Reward points and discounts are not available on personal loan
On using a credit card, you get the benefits of reward points, gift cards, vouchers, discounts, and cashback. But you do not get such offers in personal loans.
Rules for closing personal loans are also different.
You can pay the credit card amount in one go during the grace period. Apart from this, if the credit card loan amount is high, then you also get the option to convert it into EMI. However, for this, you have to pay any charges like processing fees, prepayment charges, and GST. However, a personal loan cannot be closed by paying a lump sum amount before a certain period. If you do this, then many banks charge a penalty for this.
Credit card or personal loan, which is the better option?
Which of the two options is considered better, a credit card or personal loan? In this case, most experts believe that taking a loan from a credit card is right when you have to take a loan of a small amount for a short period because you can easily repay it in the grace period. If you take a large amount through a credit card and are unable to repay it within the grace period, you may have to pay a huge interest, due to which you may get entangled in the debt trap.
So if you need a large amount and are unable to arrange the money from anywhere, it is wise to choose the option of the personal loan instead of a credit card. In this, you get more time to repay the loan. This also makes the EMI smaller and you can repay it easily.
