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Personal Loan vs. Credit Card: Which One Should I Get?

  • Highlights

  • Credit cards are great for daily purchases and shopping

  • Personal loans are good for larger expenses

  • Choosing between the two depends on your requirement and repayment ability

With so many financing options available in the market, choosing one may be hard. However, each has its own purpose, so understanding them before making a decision is important.

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Between swiping your credit card and borrowing a personal loan, the former is great for small cash needs, while the latter is great for larger payment requirements. An interest is added on your credit card payment, and if you’re unable to pay it by the due date, additional penalties are added. Thus, credit cards help you pay for your needs for as long as its validity, however with an added cost.

Personal Loans, on the other hand, have a predetermined tenor and you have to repay the loan with EMIs within this period. Being unsecured, the interest charged on these loans can also be high, though not as high as those on credit cards.

Comparing personal loans and credit cards

While choosing between credit cards and personal loans, there are several factors you need to consider, including:

1. Amount of the loan: Credit cards have a smaller loan limit, and are great for daily shopping, dining, flight tickets, etc. Personal loans, meanwhile, have a higher loan limit and can help you finance a home renovation project, a holiday abroad, and so on.

2. Interest rates: The interest rates charged on credit cards are generally higher as compared to personal loans. Moreover, since credit cards do not have a fixed tenor, the interest outgo can be very high. The interest rate on personal loans are more affordable than those of credit cards.

3. Repayment schedule: Credit cards are billed to you. You can pay for your purchase by swiping the card, and you are sent the bill for it later with the interest on the amount added. You need to pay a minimum amount every month until you repay the outstanding amount. If you use the credit card again, this process continues. Personal loans, meanwhile, have a specific predetermined tenor, and you need to repay your loan within that period through EMIs. If you don’t repay on time it affects your credit score, and hinders your ability to get a loan in the future.

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4. Simplicity of process: Paying using a credit card is simple and hassle-free. All you have to do is swipe the card and you’re done. Availing a personal loan, though, involves sending in an application and other relevant documents and waiting for its approval. However, with new pre-approved offers available on Bajaj Finserv, availing these loans has become much easier. Just share a few details and get your pre-approved offer, quickly and easily, with minimal documentation.

Thus, choosing between the two largely depends on your requirements and repayment ability. Consider these factors before you opt for either mode of financing.

The content of this document is meant merely for information purposes. The personal loan features mentioned in this article are subject to updation, completion, revision, verification and the same may change materially based on policy revisions. For more details, please visit our Personal Loan terms and conditions page here.

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