Credit Card Loan or Personal Loan – Which one is better?

At times, life lands you in situations where you are in need of extra funds. This could be a medical emergency, a wedding, or any other situation that demands you to shell out some cash; sometimes, more than what you can comfortably afford. We live in an age of digital advancements, and plenty of options to borrow money are just a click away. Two such popular options are credit card loans and personal loans. 

For those unaware about the differences between credit card loan and personal loan, this article will dive deep into the fundamental facts that you need to know about both, and what might be a better choice for you. 

So, what is a credit card loan? 

A credit card loan is a quick source of money, which is unsecured in nature and does not usually require any additional documentation. In this type of loan, a credit card user’s unused credit limit or a part of it is sanctioned to them as a loan. Please note that a loan on credit card is different from cash withdrawal using a credit card. 

Also Read: How to check loan account number (LAN)?

It is important to remember that not everyone who has a valid credit card is eligible for a loan on credit card. A credit card loan is usually sanctioned for people with a good credit history, and a history of regular repayments. 

What are the pros and cons of a credit card loan? 

Before you apply for a credit card loan, you must look at all aspects of this facility.

 Pros of credit card loan: 

• Credit card loans are pre-approved in nature, and usually need no additional documentation 
• Since they are pre-approved, they are quick to access and are disbursed in minutes 
• No collateral is needed for this type of loans
• The repayment schedule is flexible, and you can choose the number of EMIs you want to pay 

Cons of credi card loan: 

• Banks usually charge a higher rate of interest on credit card loans 
• These loans may not be available for people who do not have a good credit score 
• The total credit limit available on your credit card reduces once you take a loan against it 

What is a Personal Loan? 

A personal loan is a type of loan wherein a lump sum of money is transferred to your bank account directly. This type of loan is unsecured in nature, and needs minimal documentation from the borrower’s end. You can apply for a personal loan to meet any personal financial requirement. Your personal loan eligibility will depend on factors such as your CIBIL score, your credit history, your monthly income, etc. 

Also Read: What are Paperless Loans? How to apply?

What are the Pros and Cons of Personal Loan? 

Read ahead to find out the possible pros and cons of a personal loan. 

Pros of Personal Loan: 

• Banks usually charge a lower rate of interest rate on personal loans, as compared to credit card loans 
• You do not need a credit card to apply for this type of loan 
• Personal loans are unsecured loans, and need no collateral 
• Personal loans have a flexibie repayment schedule 

Cons of Personal Loan: 

• Unlike credit card loans which are pre-approved in nature, personal loans are not pre-approved and are dependant on your individual borrower profile 
• They take longer to be approved, than a credit card loan 
• Personal loans may come with additional charges such as processing fees and foreclosure charges 
•  Unlike credit card loans, you need to submit documents such as your PAN, aadhar, and ID proof with your personal loan application 
• If you have a poor CIBIL score, the bank not accept your personal loan application, or might charge you a higher rate of interest. 

Should You Get a Credit Card Loan, or a Personal Loan? 

 This particular answer will depend solely on your needs. A credit card loan is a good option in case you are a cerdit card user already, and need the money in your bank account immediately. You might need to bear higher interest rates for this. On the other hand, if you can wait through the approval process, and have a good CIBIL score, you might go for a personal loan. 

Also Read: How to get urgent loan with bad credit score in India?

To conclude, loans and borrowings have a long-lasting impact on how we manage our finance. Hence, it is strongly suggested to carry out sufficient research before opting for them.