Know which is Better: A Personal Loan or a Credit Card

You may need liquid cash at any time, whether it is to fund urgent expenses like medical emergencies or other monetary needs. The route that most people tend to take is that of a personal loan. However, do you know that you can pay off a cash requirement with a credit card instead? Availing a personal loan on credit card is the way for many to meet cash needs instantly.

Whether you select a personal loan from a lender or one against your credit card, both give you the facility of having cash in your possession quickly. Where you do tend to face confusion is while deciding which avenue to choose. To fulfil the requirement of short-term debt, analysts suggest that you should take a loan on your credit card.

In contrast, a personal loan is better suited for individuals who can afford to have a long repayment tenure. Basically, your decision boils down to how much interest you will have to pay, the amount you need and the repayment tenure. When you have both options before you, you may weigh the pros and cons of each and do what is right given your own circumstances.

A Personal Loan versus a Credit Card Loan

Firstly, you must assess the features of each kind of loan in order to make a decision. Here are the features of both a personal loan and a loan against a credit card.

Personal Loan Features

A personal loan is an unsecured loan.
A personal loan is given with a fixed interest rate.
A personal loan is normally sanctioned for tenures from 12 – 60 months.
Repayments on personal loans are done on EMIs along with interest charged.
To be eligible for a personal loan, you must exhibit certain eligibility criteria, such as a good credit score (at least 750).
Personal loan amounts are given as a lump sum and are used for large-scale expenses like funding weddings.

Credit Card Loan Features

The best credit cards give you loans that are termed as revolving debt.
A loan against your credit card is given for a lesser tenure than that of a personal loan. For instance, if you take a loan against one of the best credit cards like the Bajaj Finserv RBL Bank SuperCard, you get a maximum loan tenure of 3 months.
The loan amount against a credit card is a percentage of your credit card limit, determined by your card issuer.
Since you have a relationship with your lender, you don’t need too much documentation when you take a loan against your credit card. You don’t have to prove your eligibility either.
Loans against the best credit cards are dependent on credit limits on your card and are taken for smaller funding requirements, like buying flagship items.

Availability of Loans

The approval for a personal loan on credit card is given to you the moment you swipe your card. You can split your payments into easy EMIs, but the tenure of EMI repayment is usually short — up to 12 months at best. If you are still wondering which is the better alternative, it largely depends on the purpose for which you are availing the loan. If you want to buy a big-ticket item, a credit card loan is possible, provided the item falls within your credit limit. If you want to spend a larger chunk of cash, you may not have any other choice but to avail a personal loan. On the other hand, if you have a high credit limit, and you are not eligible for a personal loan, you may want to use a credit card which is easier and quicker.

Get Loans Against Your Card

Essentially, when you buy any item on EMIs with your credit card, you are taking a loan against your credit card. With the Bajaj Finserv RBL Bank SuperCard which is a multi-purpose card, you can avail upto 90-95% cash advance of your credit limit and take a loan for up to a 3-month period, at a nominal interest of 1.16% per month.