With numerous forms of credit options available, it gets confusing for a person to decide the right one. This dilemma is frustrating sometimes, but weighing the pros and cons of the options will help you always. Today, most of the popular options are credit cards and personal loans. While it is extremely challenging to decide between a personal loan or a credit card.
Some of the people say that the personal loan rates are lower than others so it is better to choose an instant loan. Hence, in that case, it’s always beneficial to understand both of them and then decide based on the situation, advantages, and benefits that suit you. Here is a short comparison of loan rates, eligibility, prepayments, credit history, and more. These will help you to choose the better ones.
Pros Of Availing A Personal Loan:
Affiliation with the bank or lender
You must have a credit card with the bank if you need to avail of a loan on the same, but for personal loans, an account with the bank is not essential, and you can directly apply for a loan based on other factors.
The rate of interest on credit cards is higher as compared to personal loans. Personal loans usually give a low rate of interest which helps you save money and reduces the cash outflow. You use a personal loan EMI calculator for calculating your monthly installments which makes it easier to keep your finances in check.
The borrowing limit on a credit card is lower in comparison to personal loans. You can only avail a small amount on a credit card, but personal loans allow you to borrow a considerable sum of money, making it easier for you to meet your financial requirements and all the expenses.
It is easier and quicker to repay the borrowed amount for a personal loan if you can pay it before the decided tenure and it does not incur any prepayment charges for the same. Credit cards, on the other hand, come with a prepayment charge of 3% and are not very beneficial in this case.
Both credit cards and personal loans indeed help you build a good credit history which proves your creditworthiness, but you can always pay off your credit card debt using a personal loan which helps you in building your credit score even more.
Pros of availing a Loan on Credit Card:
Personal loans require a lot of documentation, and you need to submit various types of documents, including age proof, bank statements, etc. The loan on a credit card, on the other hand, doesn’t require any documents and therefore makes the process of taking a loan swift and hassle-free.
There is no doubt that personal loans help save some money and are more cost-effective. Still, with a credit card loan, there are a plethora of benefits that you get and can avail, including the travel benefits, insurance coverage, discounts, and other rewards.
It is viable to purchase any products including appliances, gadgets and electronic items through a credit card because you can enjoy special after-sale services and also extended warranty for your products. For a personal loan, however, there is no such benefit that you can avail, and hence it is not viable to avail a personal loan for these kinds of things.
You can avail of the loan and use expenses immediately if you have a credit card and the required credit limit as you won’t have to wait or go through any application process for the loan. Even if you don’t have a credit card, the process is relatively simpler and quicker. Personal loan, on the other hand, follows an organized process and specific eligibility criteria to apply for a loan and takes more time than a credit card. In those times, credit cards prove to be more useful.
Therefore, it is vital to know the advantages of both personal loans and credit cards and then choose among the one which is perfect for you according to the current situation. It also depends on what you are looking for. It would be wrong to generally conclude if either of them is better since it all depends on the requirement and pros and cons of both.