When it comes to borrowing money, most people find themselves choosing between a personal loan and a credit card. Both options serve different purposes and suit different financial needs. So, how do you decide which is the better option for you?
In this blog, we’ll compare personal loans and credit cards across different parameters like interest rates, repayment flexibility, and application process, so you can make a well-informed financial decision.
A personal loan is a type of bank loan that gives you a lump sum amount to repay in fixed monthly installments. Most unsecured loans come with fixed interest rates and predefined repayment periods.
Many financial institutions offer instant loans and low-rate personal loans to eligible applicants. For example, HDFC personal loan and Bajaj Finance personal loan are among the best personal loans in India.
Credit cards allow you to borrow money up to a certain limit, and you repay it either partially or fully by the due date. Unlike personal loans, credit card debt can pile up quickly if not paid on time due to high-interest rates.
Comparison: Personal Loan vs Credit Card
| Feature | Personal Loan | Credit Card |
|---|---|---|
| Loan Amount | Higher | Limited |
| Interest Rate | Lower | Higher |
| Tenure | Fixed | Revolving |
| Processing Time | 1-3 days | Instant |
| Best For | Big expenses | Small, frequent spends |
When we talk about personal loan interest rates, they usually range between 10% to 18% annually, depending on your credit score and lender. On the other hand, credit card interest rates often exceed 30% annually.
Thus, if you are looking for personal loans with low interest rates, they clearly beat credit cards in terms of affordability.
Applying for a personal loan often involves more paperwork, including KYC verification, income proof, and a credit score check. But now, thanks to digital banking, many providers offer instant loans with minimum documentation.
Credit card applications, however, are quicker. But your approved limit may be insufficient for big expenses.
Personal loans have fixed EMIs over a defined tenure, which helps in budgeting. Credit cards, however, offer more flexibility with the “minimum due” option. But if you’re not disciplined, it may lead to mounting debt.
For weddings, travel, or medical emergencies
When you need a large amount
When you prefer fixed EMIs
If you’re looking for a low-rate personal loan
For short-term or recurring expenses
When you can repay within the interest-free period
For earning reward points or cashback
The answer lies in your financial need. If you require a larger amount with structured repayment, a personal loan is ideal. However, if you want flexibility and instant access to credit for smaller purchases, a credit card works better.
Before making a decision, compare options from trusted lenders like HDFC personal loan or Bajaj Finance personal loan to ensure you get the best deal.
Remember, both options are helpful, only when used wisely.
