Personal Loan or Credit Card Loan - Which One Should You Take?

Personal loans and credit loans are both used to get funds urgently from lenders, while understanding the distinctions between personal loans and credit is crucial. But both can be used under different terms based on financial goals. Keep reading to understand the key differences between a Personal Loan and a credit card loan and which one to choose.

What is a Personal Loan?

A Personal Loan is an unsecured loan you can use to cover any personal expenses. These expenses may include home renovation, funding a wedding, covering higher education costs, etc. 

What is a Credit Card Loan?

When considering a loan on a credit card vs a standard loan, a loan against a credit card is a financing option that allows you to borrow money from your credit card limit. You repay the borrowed fixed amount in instalments with interest. However, this credit line often comes with higher interest rates than a Personal Loan.

Personal Loan Vs Credit Card: Key Differences

Here are the key differences between a Personal Loan and a loan on a credit card:

Credit Card Loan Vs Personal Loan - Which One is Better?

Determining whether a Personal Loan or loan on credit card is better depends on various factors, including such as financial situation, needs, and borrowing habits. Personal Loan offers a maximum loan amount and flexible tenure, while a credit card loan offers the convenience of paying for expenses and paying bills later.

Advantages of a Personal Loan 

A Personal Loan offers several benefits that make it a preferred choice for many borrowers. Here’s a closer look at its key advantages:

1. Higher Loan Amount & Usage Flexibility

Personal loans typically offer higher loan amounts up to ₹50 Lakh, making them suitable for larger expenses like home renovation, medical emergencies, weddings, or even travel. Since these loans are unsecured, you don’t need to pledge any collateral, and you can use the funds for virtually any personal purpose.

2. Flexible Repayment Options

One of the biggest advantages of a Personal Loan is the repayment flexibility. You can choose a tenure that suits your financial situation, usually ranging from 12 to 84 months. This allows you to manage your minimum monthly budget effectively and repay the loan in comfortable EMIs.

3. Lower Interest Rates Compared to Credit Card Loans

Personal Loans generally come with lower interest rates than credit card loans, especially if you have a good credit score. This makes them a more cost-effective option for borrowing larger sums. Fixed interest rates also mean predictable monthly payments due to a fixed repayment schedule, helping you plan your finances better.

Advantages of Credit Card Loan

Credit card loans offer unique benefits that provide quick access and make them a convenient financing option for smaller expenses, short-term or everyday needs. Here's a detailed look at their advantages:

1. Streamlines Daily Expenses

Credit card loans are ideal for managing routine expenses such as groceries, fuel, dining, and online shopping. Instead of dipping into savings, you can use your credit card to cover these costs and repay them later. This helps maintain liquidity and ensures you’re financially prepared for unexpected situations.

2. Revolving Credit Facility

Unlike personal loans, which are disbursed as a lump sum, credit card loans operate on a revolving credit model. This means you can borrow, repay, and borrow again within your credit limit. It offers flexibility and continuous access to funds without the need to reapply for a new loan each time.

3. Builds Credit History

Using a credit card responsibly and repaying loans on time contributes positively to your credit score. A strong credit history improves your chances of getting approved for future loans at better interest rates and terms. It also reflects your financial discipline to lenders.

ALSO READ:- What Are the Best Reasons to Apply for A Personal Loan?

How to Apply for a Credit Card Loan?

Follow the steps below to apply for a loan against a credit card online:

• Step 1: Check your eligibility and inquire about options.
• Step 2: Submit all the necessary documents.
• Step 3: Choose the repayment tenure and loan amount as per eligibility. 
• Step 4: Confirm the terms and conditions.

After successful verification, you can withdraw the amount from your credit card.

How to Apply for a Personal Loan with Poonawalla Fincorp?

Here are the steps to apply for a Personal Loan with Poonawalla Fincorp:

• Step 1: Click on "Apply Now".
• Step 2: Fill out the application form.
• Step 3: Upload all necessary documents.

Upon verification, the loan amount will be credited to your bank account.

To Conclude 

A Personal Loan offers funds for unexpected expenses requiring significant amounts. It provides repayment flexibility and lower interest rates. Credit card loans provide usage flexibility for everyday spending and emergencies, which can be beneficial for managing debt. They also help you build a credit history. To make an informed borrowing decision about a Personal Loan vs. credit card loan, you must consider your financial goals and financial needs, borrowing needs, and repayment capacity. 

If you are looking for a quick funding option or want to consolidate high-interest debt, you can avail of a Personal Loan with Poonawalla Fincorp at competitive interest rates.

Frequently Asked Questions

What is the difference between a Personal Loan and a credit card loan?
A personal loan is a lump-sum unsecured loan with fixed repayments, while a credit card loan is borrowed from your credit limit and repaid in flexible instalments.

Which is better: a Personal Loan or a credit card loan?
It depends on your needs. Personal loans are better for large expenses, and credit card loans are ideal for short-term or daily spending.

How much can I borrow through a loan against a credit card?
It depends on your available credit limit and the lender’s policies.

What are the benefits of a personal loan?
Higher loan amount, flexible repayment, instant access to application, longer tenure, lower interest rates, and the necessity of providing identity proof.

Can I use a credit card loan for travel expenses?
Yes, but ensure you can repay within the loan term to avoid high interest.