In this article, let us evaluate both credit cards and personal loans on various factors:
- When it comes to interest rates, both credit card and personal loans are expensive. But personal loans are available at comparatively lower rates than credit cards. Personal loans are available from 14% to 22%. Credit cards on other hand can charge anywhere between 30 to 50% per annum.
- There is already a limit in place when it comes to using credit card. But lenders evaluate Personal Loan requirements by taking into account the nature of employment, current credit score, current monthly income, existing loan obligations, tenure of loan etc.
- In case of credit cards, the loan limit is already approved. So when you use the card, you are actually using the loan money from pre-approved credit limit. Personal loans require processing before the application is processed and money is disbursed in favor of the borrower.
- Unlike credit cards, personal loans do not have any credit limit. The credit limit of the credit card is blocked upto the amount of money that has been utilized. The limit slowly increases as the repayment starts and reduces the card outstanding.
There is no doubt that credit card is a quicker and more convenient form of financing. But this comes at a cost – extremely high rates of interest if you don’t clear your dues within the interest-free period. So it’s imperative that you make every effort to clear off your dues before the due date. In case your requirement is large and you can wait for few days, its better to take a personal loan that are much cheaper.