What’s a better source of financing? Credit Cards or Personal Loans?
You can depend on two convenient financial choices if you want to meet urgent financing criteria or pay off debt: credit cards and personal loans. Although you can use personal loans as a debt consolidation loan to pay off several debts at once, you can use a credit card to finance your immediate to short-term financial needs. Nowadays it get easy to avail loan via online loan app.
And although applying online and accessing both credit cards and personal loans is easy, they serve slightly different purposes.
If you are looking for the answer to the age-old question: 'What is the difference between a credit card and a personal loan?’ Read our guide to make sense of this:
The Borrowing Limit
When it comes to credit cards, the borrowing cap is the credit limit that is determined based on your income and other factors. Conversely, lenders offering personal loans measure your borrowing amount on the basis of various variables such as your salary and credit history. If you are looking to see how much you can borrow, you can use an online personal loan eligibility calculator and check how much you could qualifying for before applying.
The Purpose of either kind of financing
A credit card is a very popular kind of plastic money, and it's important to note that it gives you an income-based credit cap, which you can use to pay for expenses. Paying for your day-to-day expenditures including electric bills or purchasing goods and services may be convenient using a credit card. You can also use it for personal as well as professional purposes in a short-term cash pinch. The sum you use is like a loan in the next billing cycle that you have to pay for.
A personal loan, meanwhile, is a collateral-free option that you can use for any purpose, without any restriction, up to the sanctioned amount. This is ideal if you need funds for big ticket purchases or urgent needs. For instance, you can fund the tuition fees for your children, plan a family vacation abroad, manage the expenses of a wedding in your family or a home renovation project. A personal loan could also serve as a debt consolidation loan, as it can help you pay off multiple debts that you may have.
Disbursal of money
In the case of a credit card, the issuer grants you a credit limit from which you can make several payments until you have exceeded the limit. On the other hand, the lenders of a personal loan give a lump sum disbursement and charge interest on the entire amount. Some financiers – such as Bajaj Finserv App – offer a versatile personal loan that allows you to make several withdrawals from your limit and charge interest only to the amount used. This way, you can save more over EMIs.
Repayment of money
The issuer of a credit card charges you every 25 to 31 days for the amount you use. You do get a grace period of 20 days where there are no interest payments for your fees. When you fail to pay your fees at the end of these 45-51 days. Your remaining balance is subject to the prevailing interest rate.
Inversely, if you pay bills on time, you don't have to pay interest. Your cap has been replenished to that degree. Know that the interest rate on the credit card is typically very high, particularly when compared to loans, so schedule your monthly payments on time to prevent a debt trap.
Similarly, the interest rates charged on your personal loan determine the EMI amount that you will be paying over the course of the agreed tenor of your personal loan. The EMIs in this case, comprises both the interest charged on your loan as well as the principal. Missing a payment means you are likely to be charged a late penalty as well as penal interest.
Some banks and NBFCs, including Bajaj Finserv, allow you to pay interest-only EMIs over the course of the tenor and repay the principal later when you choose the flexi personal loan. This can help you manage your cash flow better.
Use the information that we just presented to you to make an informed decision about choosing either a credit card or a personal loan. Do remember that ultimately, either option is a kind of debt, and while it may be a great way to juggle your resources when managed well, when misused can actually spell disaster.
The Best Personal Loan
Personal loan app is the best way out for getting easy loan. You may borrow a manageable amount of money as a personal loan to build up your credit score and repay it in a timely manner. To address the question, 'What's the best personal loan? 'Do some research of your own and compare borrowers on the basis of ease of application, eligibility requirements and cost-effectiveness.
With this loan, you can access high-value sums up to Rs.25 lakh at nominal personal loan interest rates. For such a large interest, you can use it as a debt relief loan to get out of the debt process in no time if you're wondering how to apply for a personal loan. The method is easy, whether you want to do it online or offline. Fill in the relevant application form, request the necessary documentation and wait for approval. This process becomes even more comfortable when you review your pre-approved offer by providing the required information, such as your name and contact number. This way, you can see a personalized offer waiting for you and you can benefit from instant approval!