Whether to go for Personal Loan or Credit card is totally subjective matter and depends up on the credit score and repayment capacity of an individual. Mentioned below are the features of both credit card and Personal loan for an individual to take decision about what is a better option.
Source : netdna-ssl.com
Credit cards are one of the most expensive forms of financing, which have high interest rates generally more than 10% unless one have a good credit score which can avail at lower interest. On the credit card one needs to pay a minimum balance on a due date but paying the full amount is recommended in order to reduce interest burden. Credit cards are Unsecured and does not really need any collateral securities. One can use credit cards for any purpose as there are no restrictions. The loan amount depends totally on the limit available on your credit card. Only selected customers are eligible for a loan against the credit card and card limit is blocked, which is subsequently released as you pay back the EMIs.
Source : res.cloudinary.com
Personal Loans may be secured or unsecured loans which can be used to fulfill any personal needs without any restriction. Banks approve personal loan by considering ones eligibility to pay interest, his credit score and credit history. These loans are very costly and ranges from thousands to lakhs of rupees. The repayment period ranges between one year to five years unlike credit cards. Unlike credit cards personal loans can be repaid in equal installment basis and such installment includes Interest and Principal repayment.
Source : insidecatholic.com
Generally, personal loans are used to fulfill higher objectives such as starting small business, renovating home etc. whereas credit card are generally used for buying vehicles or smart phones etc. Credit cards are ideal for short-term expenses that you can pay off on monthly basis, while personal loans are best used for comparatively larger expenses and consolidating various loans. In order to decide whether to go for credit card or personal loan will depend on your credit score, how much you want to borrow and how long you have to repay it. A personal loan is a good option if you need a large amount of loan.
Source : snbonline.com
In order to decide whether to go for Personal loan or Credit card on should have answer to the following questions:
- What is your Credit Score?
- How long will it take to pay the debt?
- How much borrowing is needed?
- Are you an impulsive buyer?
Source : maryfgenovese.com
Thus in spite of it being subjective matter However, if you just need a smaller amount and don’t mind your credit limit being blocked temporarily, then a credit card loan might be a more convenient choice. It could also become a convenient option if personal loan application is rejected by bank. While there are many deciding factors in deciding about personal loan vs. credit card, the biggest one is undoubtedly interest.