Personal Loan or Credit Card | Which one is Better for you?
Many people are confused whether to get a personal loan or a credit card loan. Let’s know how good personal loan and credit card loan are and what are some of the problems involved. In this article, you will learn about what personal loans and credit card loans are and who they are best for.
Whether you want to get a personal loan or a credit card loan, credit score is important for you. A credit score is a three-digit number. The providers of this number are companies like CIBIL, Equifax, Experian and CRIF Highmark under RBI credit bureaus. This credit score is decided based on your previous loans, bank balance, paid loans etc. The higher your credit score, the easier it is for you to get a loan.
Now let’s know everything about personal loan. A personal loan means that the bank will give you the amount you have applied for. This amount has to be paid monthly along with interest. This is called repayment cycle. Tenure can be from 2 years to 5 years or more depending on the bank. In terms of interest rate, personal loan is less than credit card loan. The higher your credit score, the lower the interest rate.
If you can use a personal loan anywhere, you can get a loan for many personal things like buying appliances, paying off credit card debt, going on vacation, repairing your home. This is an unsecured loan. You can get a loan without any collateral. For this there will be origination fees only. Next let’s see what are the positive and negative in personal loan.
Positive in Personal Loan:
- We get the excess loan amount instantly.
- Large purchases can be made due to availability of excess amount.
- Personal loan interest is lower than credit card interest.
- We know how much we have to pay for the next month.
Negative in Personal Loan:
- Once you have paid off the loan, you will not get a repeat loan.
- Rewards means nothing.
- You may have to pay some fees like Origination Fees.
A credit card loan can be called a revolving credit. This means you take out a loan and pay it monthly with interest. Interest on a credit card means that you pay as much as you borrow. You can pay the full outstanding amount if you wish. Rewards are more available on credit cards. But the interest rate of credit card is higher than that of personal loan.
Positives in Credit Cards:
- Since Credit Card is revolving credit, you can get a loan when needed.
- You will get a lot of rewards, discounts etc.
- If the loan is paid properly, the credit limit will keep increasing.
Negatives of Credit Cards:
- In case you fail to pay the loan, the interest, fees etc. will increase.
- If you don’t know how to use credit card properly, big financial crime can happen.
- Credit card interest rate is higher than personal loan.