A personal loan and a credit card loan are two unsecured financing solutions you can avail when in need. With these collateral-free options, you don’t have to undergo the hassle of identifying and pledging an asset. Similarly, you can use both forms of credit without any restrictions. However, your choice between a personal loan and a credit card loan may hinge on not only the status of your personal finances but also convenience.
For instance, a credit card loan may not require you to go through complicated application procedures, unlike regular personal loans. However, now you can apply for an online loan using an instant loan app. A personal finance app like the Bajaj Finserv App is one of the best loan apps in India. It allows you to apply instantly via your smartphone and even gives you access to pre-approved personal loans customized for you!
Beyond these common factors, however, personal loans and loans on credit cards differ considerably and one may be more useful for you as compared to the other. To understand their key differences side by side, read on.
Terms of application and loan amount
To avail a credit card loan, you need to be an existing cardholder and seek a loan with your existing issuer. Loans on a credit card, by nature, are tied to your available credit limit, so you may find the loan amount limited.
On the other hand, you can apply for a personal loan with any lender you desire. While personal loans have eligibility criteria based on age and income, they are easy to meet. Moreover, you can apply via a pre-approved offer on an online loan app like the Bajaj Finserv App to enjoy a hassle-free, one-step application. Personal loans also offer you much more substantial financing. For example, you can avail of funding up to Rs.25 lakh without collateral via the Bajaj Finserv Personal Loan.
Since credit card loans simply lend you a portion of your credit limit, they do not require you to produce additional documentation.
Personal loans, in comparison, require you to furnish documents like salary slips, address, and ID proofs. However, you can cut down on paperwork when you apply with top lenders like Bajaj Finserv who require minimal documentation.
Interest rates on credit card and personal loans are similar, but the rate you get depends on various factors. These include your credit score, current salary, and for a credit card loan, your history with repayment.
While most credit card loan interest rates are fixed for the entire tenor, you can choose a floating interest rate on a personal loan, which allows you to enjoy lower rates as per the financial climate. Further, when you choose a Bajaj Finserv Flexi Personal Loan, you can reduce your EMIs by up to 45% by paying interest-only EMIs.
Credit card loans are better suited for short-term needs as tenors are generally shorter when compared to personal loans. Additionally, when you take a loan against a credit card, you block a portion of your credit limit for the tenor of the loan. This means you lose out on purchasing power of that particular credit card during the loan’s repayment duration.
Conversely, personal loan tenors usually span up to 60 months, thus giving you the flexibility to space out your EMIs and pay for big-ticket purchases affordable.
On a credit card loan, access to more funds depends on your issuer’s policies and on the amount unutilized on your credit limit. Getting additional finance from a personal loan is a whole lot easier. For instance, when you avail a flexi facility from Bajaj Finserv, you can borrow multiple times from your sanction and pay interest only on what you use. This helps you address unpredictable needs conveniently.
Depending on your lender, you may be able to automate repayments on your credit card loan. Loan apps in India like Bajaj Finserv’s Personal Loan App allows you to do the same. Further, on the Bajaj Finserv app, you can make part-prepayments and even foreclose your personal loan on the go, and without any hassles. When you choose the Flexi feature on this loan, you can enjoy zero fees for part-prepayment.
Credit card loans are good options for instant loan financing as they generally give you funding within 24 hours. Personal loan financing can take longer due to verification of your details. However, Bajaj Finserv offers you a 24-hour loan disbursal once your application is approved. You can hurry this up easily. Simply check your pre-approved loan offer to expedite approval.
By keeping these differences in mind, you can make an informed choice between a loan against credit card and a personal loan and access the finances you need.