When it is about borrowing money for small ticket expenditures, you can clearly rely upon your credit card to make the buys for the time being. But when you require making massive expenditures that extend your credit card limit, loans come across as a rescue.
Just like a credit card, you borrow funds from the bank when you avail of a loan. However, using a credit card makes you thoroughly liable to make the repayment of the amount on a monthly basis, while loans hold a longer repayment duration. When it is about borrowing money from the bank to mitigate your present expenditures, there are 2 ways of doing this – you can either select to opt for your credit card or avail of a personal loan from Axis Bank, HDFC Bank, Dhani personal loan or any other lender as per your preference. You can also contact the respective lenders for personal loans through customer care support. For instance, if you are looking to avail Dhani personal loan, then you can approach the lender by contacting Dhani personal loan customer care. The same applies to any other lender from whom you want to avail of a personal loan.
Let’s understand what’s the difference between a personal loan and a credit card and try to know which one would work well for you based on the common parameters.
What’s a credit card loan?
A credit card loan is a pre-approved loan from a bank. As you already hold a credit card with an issuer, all your financial and personal information is with the lender. Due to this, loan against credit cards does not come with any documentation process and hence may be looked upon as pre-approved.
A loan against a credit card may be referred to as the fastest way of availing of an unsecured loan. When you avail of the credit card loan, the loan amount is deducted from the available credit card limit and is ultimately transferred to your savings account. It must be remembered that a loan against a credit card is certainly not the same as withdrawing cash using a credit card.
When can you apply for the credit card loan?
You must apply for a credit card loan just in the listed situations –
∙ If you require cash in the case of any emergency.
∙ If you require meeting your expenditures of any relatively smaller amount.
∙ If you are ineligible for a personal loan or any kind of loan to meet your exigency.
What is a personal loan?
A personal loan is referred to as an unsecured loan that might be borrowed from a bank for bigger expenditures. Usually, a personal loan is availed in the case of medical exigencies, buying of property, beginning a business etc., as it is an unsecured loan in nature, a personal loan charges a high rate of interest. Also, as the loan amount, in many scenarios, is high, these kinds of loans have considerably higher repayment duration.
Any individual can avail of a personal loan from any bank. Hence, when you place an application for a personal loan, you must initially prove your eligibility for this and then ensure to go through the loan application and authentication procedure to avail of the loan.
When can you apply for a personal loan?
You must apply for a personal loan just in the listed scenarios –
∙ When you require meeting the expenditures that include a massive amount of money.
∙ If you have nearly a week’s time to wait for the loan proceeds.
∙ When you decide on purchasing a car or home or beginning a business on your own.
Personal loan vs credit card loan
Even though both kinds of loans have various similarities in relation to the credit provider. For instance, the offering of fixed proceeds at a pre-approved interest rate, monthly repayments of interest and principal amount, additional fees or charges on the late payments and others. However, even after such similarities, there are differences between personal loans and credit cards.
Let’s go through some of the most common distinctions between personal loans and credit card loans to find out about them in a better way –
|Feature||Personal loan||Credit Card Loan|
|Application procedure||You will be asked to show specific documents to apply for the personal loan for verification purposes.||These loans do not need any additional documentation as the lender already holds your financial and personal details.|
|Loan amount||Such loans must be preferred in the case of the bigger loan amount||Such loans are suitable just if you are looking to borrow a lesser loan amount.|
|Loan duration||Personal loans have a higher repayment tenure instead||Credit card loans have a shorter repayment tenure|
|Additional expenditures||Lenders charge the processing fees and other expenditures on the personal loan, besides other interest charges.||Credit card loans do not have any kind of additional expenditures besides interest charges.|
|Eligibility||Even noncustomers of the bank can place an application for this loan type.||Just the credit card holders can place an application for this kind of loan.|
|Loan amount payment||The loan amount is paid in the form of a lump sum to your saving or current account or through cheque or cash.||The loan proceeds are directly transferred to your current or savings account.|
|Time required for the approval||A personal loan usually is approved in 2 – 7 days.||A loan against a credit card is usually approved on the same day of placing the application for a loan.|
|Loan amount repayment||The loan amount must be repaid to the bank in predetermined instalments in a pre-approved time period.||The loan amount must be ensured to be paid in monthly EMIs as part of your credit card bills.|
|Highest loan amount||Maximum loan proceeds are determined by the bank based on the borrower’s credit history and income.||The maximum borrowing limit is based on the pre-approved card limit set by the credit card issuer.|
Pro tips – Before you decide on moving ahead and avail a loan, whether it is a personal loan or credit card loan, it is crucial to analyze your financial needs and your potential to repay it on time. Borrowing a loan from any bank might be simple, but repaying the same requires a lot of patience and might also feel extremely heavy on the pocket if you look at the high-interest rate. Additionally, ensure to just borrow the amount that is thoroughly required by you. If you have any smaller monetary needs, then a credit card loan will be the best choice for you.