Personal Loan or Credit Card: Which one to choose and Why?
Personal loans and Credit cards are two very different lines of credit, each with its own benefits and drawbacks. Credit cards are typically easier to qualify for, but offer less long-term flexibility. On the other hand, personal loans tend to be harder to qualify for, with some lenders requiring solid credit history and income verification. However, if you do manage to get one, you can usually expect lower interest rates than you’d get from a credit card,
Benefits of Personal Loans Over Credit Card
A personal loan is legally bound
Personal loan is a legally bound contract, whereas credit cards are not.
Credit card companies can levy late fees or charge enhanced interest rates based on their discretion without going through any legal process to do so.
Free from Obligations
Personal loans are free from obligations. The borrower has to pay the money back on time with interest and it is considered a secured loan.
However, credit cards have no such obligation and can be used for any purpose you wish to use them.
Predefined repayment Schedule
With a predefined repayment schedule, you can plan your finances better. It is important because it will help you to stick to the plan and pay off your loan faster.
No collateral is required while applying for this type of loan which makes it easier than having to provide papers regarding properties or other assets in order to get approved with these types of loans available at banks or other financial institutions across India
Drawbacks of Credit Card
- Credit cards discourage self-control
- Credit card Interest is expensive
- Poor credit score affects a lot
- It Can Lead to Bankruptcy
- It Can Erode Your Peace of Mind
If you’re looking for a quick solution to your money problems, a personal loan might not be the best option. Personal loans come in handy when you need cash quickly or have an important purchase that requires paying up front. They also work well as a way to consolidate other debts into one monthly payment so that it’s easier to keep track of finances—that’s especially helpful if something unexpected comes up and causes your budget to fall apart (like an unexpected car repair).