Depending on the urgency and requirement, one can opt to take a credit card or a personal loan. But what is the difference between a credit card loan and a personal loan?
Read on to know more.
|
Feature |
Personal Loan |
Credit Card Loan |
|
Procedure |
Apply through the lender’s website or mobile banking app. |
You can accept the pre-approved offers on your credit card or apply for a loan via the respective bank. |
|
Borrowing Limit |
Depends on the income and is calculated by the lender. |
It depends on the pre-approved limit that the lender sets. |
|
Interest Rate |
At moneyview, the interest rate starts from 1.33% per month. This can change depending on your credit score, financial behavior, and so on. |
Usually, the interest rate for credit card loans is higher than that of personal loans. |
|
Documents |
Minimal documentation is required. |
No documents required. |
A personal loan is an unsecured loan that banks or other financial institutions provide. Personal loans are instant and require minimum documentation. Customers are not required to provide collateral as security for a personal loan, making them easier to avail.
The amount you receive as a loan and its interest rate depends on several factors such as income, credit score, credit history, and more.
The money from this loan can be applied to any valid need for financial support. It must be repaid in line with the conditions set forth by the bank, just like any other loan.
The eligibility criteria for a personal loan can vary depending on the lender, but common factors that lenders typically consider when determining eligibility include:
Credit Score: A higher credit score usually increases your chances of loan approval.
Income Stability: Lenders often look at your income and employment history to ensure you have a stable source of income to repay the loan.
Debt-to-Income Ratio (DTI): This ratio evaluates the difference between your monthly income and debt payments. Lenders prefer a lower DTI since it indicates that you make enough money to handle extra debt.
Age: You typically need to be of legal age (18 or older) and a citizen or a permanent resident of the country where you're applying for the loan.
Borrowing History: A responsible credit history can strengthen your application.
Purpose of Loan: Some lenders might consider the purpose for which you're seeking the loan. For instance, loans for education or medical emergencies might have different criteria.
Personal loans offer several benefits to the end user. Here are some common advantages of taking a personal loan.
Versatile Use: You can use the money for various needs like wedding expenses, home improvements, or unexpected expenses.
No Collateral Needed: You don't have to risk your assets since personal loans are unsecured.
Fixed Interest Rates: The interest rate remains the same throughout the loan, making it easier to budget.
Quick Access to Funds: Once approved, you can get the money fast to cover urgent expenses.
Credit Improvement: Responsible repayment can boost your credit score over time.
Credit cardholders can borrow against their available credit limit through Loan Against Credit Card to get immediate funds. It provides easy access to money without requiring extra paperwork or security. The borrowed sum is then repaid in installments, with interest charges.
The requirements may vary depending on the lender, but you need to meet the following requirements:
To qualify for a credit card loan, you must have a credit card. If you do not already have a credit card, you can easily apply for one through the respective bank’s website or mobile app.
To be qualified for a credit card loan, customers must have a good credit score. A high credit score demonstrates that you are a dependable borrower who will repay your loan on time.
Here are the benefits of a loan against a credit card:
Customers can access funds quickly without having to go through a long application procedure.
Loans secured by credit cards do not require collateral or security.
Credit card loans have multiple repayment options, allowing borrowers to select the repayment plan that best meets their budget and situation.
Credit card loans offer competitive interest rates, making them an affordable choice for customers.
Credit card loans require minimum documentation and are quick to approve.
You can avail of a personal loan if your requirement is for a large expense and you are willing to pay for it in EMIs over an extended period of time. For example, if you want a large sum of money for a family wedding, then you can opt for a personal loan.
You can take a credit card loan if you know that you can pay off the amount quickly as compared to a personal loan. For example, if you want an additional amount of money to purchase furnishing products for your home, then you can opt for a credit card loan.
Check the following to know more:
You want a longer repayment tenure.
To pay off another loan using the amount from the personal loan at a lower rate of interest. This is also known as Debt-Consolidation.
You want a loan amount that is more than your credit card limit
Your expense is not exceeding your credit limit.
When your requirement is immediate.
Better interest rate compared to a Personal Loan.
Your eligibility does not match with the requirements needed for a Personal Loan.
Credit card loans offer quick access and convenience but come with higher interest rates and fees. Personal loans, while requiring a formal application, often have lower interest rates and fixed repayment terms. Choosing between them depends on the urgency of funds and your ability to repay promptly.
The answer depends on your requirements. If your requirement is not major, then you can opt for a credit card loan and repay it within a short tenure. If you need a sum of money that is higher than your credit card limit, then you can opt for a personal loan.
A credit limit is a maximum amount that is fixed by your bank for your credit card. For example, if your credit card limit is INR 50,000, then you won’t be able to spend more than the specified amount by using your credit card.
No, a personal loan will not negatively affect your credit score. However, if you miss your EMI repayment, then it will affect your CIBIL score negatively.
Yes, credit card loans are available to both new and old credit cardholders.
The rate of interest on a credit card loan is usually higher than on a personal loan. Also, if the repayment is not paid monthly, then severe penalties are applied.
Yes, you can apply for a personal loan online. Contact us at Money View to get your personal loan processed in no time.
Yes, you can apply for a credit card loan online via net banking or through your bank’s mobile app. If you wish to get more clarity, then you can opt to go to a bank to apply the same.
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