Personal Loan Vs Credit Card Loan I Personal Loan Or Credit Card Loan, Which Is Best For You?

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Personal loan or loan against credit card, which is best for you? | Photo credit: Thinkstock

Desperate times call for desperate action, the saying goes, and at a time when the ongoing public health disaster is one such scenario. He has depleted finances, especially those facing crushing hospital bills.

Personal loans and credit card loans are among the fastest methods of raising funds for urgent needs such as health costs. The two are quite similar as they are unsecured meaning that no collateral is required and come with a fixed interest rate and no terms of use of the sanctioned amount.

Interest rate: Although a credit card loan is not recommended due to the high cost of interest, here’s how it differs from personal loans. For personal loans, the interest rate is usually between 10-24% per annum and is usually determined based on factors such as credit profile, payment history, professional profile of the applicant, profile of the applicant. employer, etc.

Eligibility: Several factors related to the loan applicant’s credit profile are taken into account when lenders assess a loan application. These include the applicant’s monthly income, credit rating, other loan obligations, job stability, and employer profile in the event of a personal loan. Personal loans are paid to existing and new clients under certain conditions.

A credit card loan, however, is pre-approved debt issued by credit card issuers to their customers based on factors such as card type, spending habits, credit limit, and history. reimbursement of invoices.

Amount of the loan: The amount of personal loans usually ranges from Rs 50,000 to Rs 25,000, but some banks and NBFC disburse up to Rs 40 lakh. The sanctioned amount depends on the credit history and profile of the loan seeker.

For credit cards, this amount goes up to a maximum credit card limit and is usually predetermined for each customer. When a credit card loan is issued, the credit limit up to the loan amount is blocked and then released as it is repaid. Some credit card issuers even offer more than the credit limit for some users.

Loan processing time: Personal loan applicants are required to submit documents such as payslips, RTI form, and other loan approval documents. It takes around 2-7 days for the disbursement of personal loans if the application is accepted. Some lenders can approve the loan amount faster in case of pre-approved loans.

Credit card loans are pre-approved and the amount is usually paid the same day you apply for the instant deposit within hours.

Processing fee : For a personal loan, the processing fee can go up to 3% while it is 2-2.5% for a loan against credit card. These processing fees can have a big impact on the overall cost of the loan and therefore should be compared before making a call.

How to choose between two: The credit card loan is best suited for those who are in immediate need of the funds and can repay the same within a short period of time. Personal loans are more suitable for those who are looking for larger loans and have the capacity to repay them over a longer term. The lower interest rate of personal loans will help the borrower to reduce the overall cost of interest.

Before choosing between the two, compare the characteristics of the loan offered.

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