Every time you need quick cash, financial products such as personal loans and credit cards come to your mind. Despite planning your budget meticulously, you almost always come across expenses that are unforeseen in nature. Thanks to the easy availability of loans and credit cards these days, you can meet such expenses easily. Although both loans and credit cards can help you with your unplanned finances, one is very different from the other. Whether you choose to get a personal loan or use your credit card eventually depends on your preference.
Wondering which of the two options suit you better? Listed below are the major differences between personal loans and credit cards that can help you decide the ideal choice for you to depend on: Parameter for comparison Personal Loan Credit Card Nature of the product It is a fixed loan that you repay with equal monthly payments spread over the tenure of your loan. It works like a revolving debt in which the amount you borrow varies depending on how much you spend and how much you pay off every month. Frequency of use Once you take a personal loan, you have to start paying your monthly EMIs, even if you haven't put the money to use. In case of a credit card, you can choose to use it whenever you want. However, since you are not required to repay the entire amount all at once, you tend to accumulate debt by neglecting your credit card usage. Cost of acquiring Personal loan interest rates depend on your eligibility, income, CIBIL score, and a few other criteria. Tata capital offers personal loans at the lowest interest rates, starting at just 10.99%. It is a factor of your credit card's APR (Annual Percentage Rate). The interest accumulates depending on the same. Some banks also charge over-the-limit fees, late fees and annual fees on the credit cards they issue. Ease of applying Although the personal loan eligibility criteria are easy to meet, qualifying for a personal loan is slightly more difficult. Qualifying for a credit card is much easier even if you have an average credit score. However, getting a credit card with a low interest rate is not that easy. You need to build an excellent credit score. Ideal debt situation Apply for personal loan when you are going for long-term debt, say 5 to 15 years. It allows you to consolidate your debt at the affordable interest rate over a long period of time. You can get a fair idea of your monthly EMI by using a personal loan EMI calculator. A credit card is more suited for short-term debt. Both credit cards and personal loans allow you to borrow and repay the money over time, and both charge interest for this service. However, one can be a lot better than the other depending on your credit requirements and other circumstances. You must evaluate the products carefully before making a choice. You can also visit Tata Capital's website and explore all the options to ensure you make a well-informed decision.
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