Personal Loan Vs Credit Card Loan - Which One Is Better?

You can borrow money from lenders on your credit cards or with personal loans. Read on to know whether personal loan or credit card loan is better at IIFL finance.

28 Nov,2022 09:18 IST 19 Views
Personal Loan Vs Credit Card Loan - Which One Is Better?

Most people break into their savings when they need immediate access to funds. Although saving money takes time, urgent financial needs can instantly drain your savings. Hence, applying for a loan from a trustworthy financier is wiser than liquidating your assets during financial emergencies.

You can borrow money from financial institutions on your credit cards or with personal loans. Although they are unsecured loans, they are different in particular ways. Here’s the difference between personal loans vs loans on a credit card.

What Is A personal loan?

Personal loans are unsecured loans useful for various purposes, from medical expenses to expensive purchases to vacations and even debt consolidation. You can repay these loans through monthly instalments based on your preferred repayment term. You don't have to pledge any collateral for a personal loan, making it easy to borrow funds and meet your financial needs.

What Is A Credit Card Loan?

A credit card loan is only available to holders of credit cards. These loans are a specific portion of your credit card limit. Credit card loans are similar to personal loans because borrowers can decide how to spend their borrowed funds.

A Personal Loan Vs Credit Card Loan

Personal and credit card loans differ significantly on the following parameters:

Basis of Difference

Personal Loan

Credit Card

Eligibility

Lenders accept applications from non-customers.

You must be a select credit cardholder to qualify

How to avail?

Any financial institution can provide you with a personal loan

You can only get a credit card loan from your credit card company

Procedure for Borrowing

By submitting an application to a bank or NBFC with documentation

By accepting or applying for a pre-approved offer from a bank

Disbursement

A lump sum payment made to a customer's savings or current account or via check

In the form of a check or credited directly to a savings or current account (if it is the same bank)

Approval Time

3-5 business days

Within 24 hours

Repayment

In the form of EMI payments to the bank

The amount of the EMIs is added to the monthly credit card statement for the period stated

Tenure

From one to five years

From one to five years

Borrowing Limit

The bank will calculate the amount based on proof of income

Provider-approved limits apply

Interest Rates

Starting at 10.50%; depends on credit history and income

Generally higher than personal loans; may vary from bank to bank as well as customer to customer

Documents

A proof of identity, proof of address, and proof of income are required

There is no need for additional documentation

Credit card loans have fewer options for borrowers. In contrast, borrowers have many options when obtaining personal loans. After assessing the market for the best offers, interest rates, tenure, and foreclosure options, they can choose a lender.

High-interest rates may prevent a person from borrowing the required amount or will strain their pockets later. If you consider taking out a loan, whether a personal loan or a credit card, you should do so with prudence.

Loan On Credit Card vs Personal Loan - Which One Is Better?

Despite being unsecured, both loans cater to different customer needs. It is better to choose these based on your purpose.

Credit card loans may be the right option if a small amount will meet your needs. However, a credit card loan requires a good pre-approval offer. Personal loans are a better option if you need a larger sum of money. The credit card limits the amount the borrower can borrow, and the repayment guidelines are strict.

Credit cards offer small payments at high-interest rates, but personal loans offer higher loan amounts with more flexibility in repayment terms.

Take Advantage Of IIFL Finance Personal Loan

IIFL Finance offers comprehensive and customised personal loans. The disbursement process of our personal loans is fast, and we offer loans up to Rs 5 lakh.

You can apply for the loan online or visit your nearest branch to verify your KYC information. We also have a personal loan calculator to estimate your repayment obligations. Apply for your ideal personal loan today!

FAQs

Q1. Will personal loans affect my credit score?
Ans. Making timely and consistent payments on your debt can improve your credit score if you take out a personal loan. You can suffer credit damage when making late payments are reported to the credit bureau.

Q2. Which is better: a credit card or a personal loan?
Ans. It depends on your needs. A credit card loan is a better option when you need small loans for a short period. The amount is credited against the balance credit limit on your card, making it an instant funding option.
Personal loans are a better option when you need a larger amount of money. These loans allow borrowers to apply for higher loan amounts with flexible repayment options.

Most Read

Franking and Stamping: What’s the difference?
14 Aug,2017 03:45 IST
36647 Views
Like 2410 2410 Likes
How To Get A Personal Loan For A Low CIBIL Score?
21 Jun,2022 09:38 IST
19855 Views
Like 240 240 Likes
What is equitable mortgage home loan?
8 Mar,2019 05:15 IST
12009 Views
Like 2709 2709 Likes
What Is The Meaning Of E-Mandate For Mutual Funds?
23 Oct,2018 04:15 IST
9674 Views
Like 1720 1720 Likes

Get in Touch