A lot has been said and heard from various sources in favor of and against personal loan and credit card loanand it has done nothing but confused you more than you actually were. Before divulging into further details, it is important to go through the basics of both once again. Both personal loan and credit card loansare Unsecured Loans and don’t need any collateral, have almost the same processing fee and rate of interest but are used to meet different requirements.
Now if you ask us, we will simply point out the differences between the two and let you decide their merit on your own.
Take a look at the following point of differences between a personal loan and a credit card to find out which one’s better for you.
- In order to be able to get a loan on a credit card, the borrower must have the bank’s credit card. In order to avail a personal loan, the borrower can simply reach out to a bank and put forward their loan application.
- The minimum borrowing limit laid for personal loans is at least Rs.50,000. However, a borrower can borrow as little as Rs.3000- Rs.5000 through a credit card.
- In order to avail a personal loan, a borrower needs to present certain documents like address proof, salary slips and bank statements to prove their eligibility for the said personal loan. However, in case of availing a loan against credit, the borrower doesn’t need to present any documents as such.
- Personal loans come with a minimum term period of 1-2 years and are deemed suitable for a long-term loan of a big amount. If you actually want to take a loan with a short-term period and think that you will be able to repay the amount within a short span of time then you should choose credit card loan.
- The personal loans come with a rate of interest that ranges between 10-15% while the rate of interest levied on loans on credit card range between 16-20%.
- The rate of interest levied on personal loans is negotiable but when it comes to loans on credit card the interest charged on the amount is fixed and non-negotiable.
- In terms of repayment option, a personal loan borrower can choose to repay their loan amount earlier than the pre-decided date and take a breath of relief. But a borrower who has availed loan on credit card can’t repay their loan amount earlier than the pre-decided date, because the prepayment option comes with a penalty of 3%.
- While one can enjoy quite a number of rewards, discounts, travel benefits and coverage on a credit card loan, the personal loans are considered to be a cost-efficient option.
Take these points into considerations while deciding the merit of both personal loans and loan on credit card and then apply for the most suitable one as per your requirement.