We may face unforeseen costs or short-term financial requirements at any time. People think about personal loans and credit cards as prospective solutions. Both choices provide accessibility of funds.
However, the terms and conditions, interest rates, and payback schedules are different. Let’s have a look at the distinctions between credit cards and personal loans. This will assist you in deciding which is best for short-term financial support.
The decision of whether to apply for a credit card or a personal loan is somewhat more complicated. The amount of money you require and the time frame in which you can repay it are the two most important considerations.
Basic Differences Between Credit Cards and Personal Loans
| Personal Loan | Credit Card | |
| Best For | Large-scale purchases or debt reduction. | Regular spending. |
| Reimbursement | Set-term payments with fixed amounts. | A monthly minimum payment is required for revolving credit. |
| Interest Charge | The interest rate will remain fixed for the entire term of the loan. | The variable interest rate is applied to any outstanding debt. |
| Charges/ Fees | Origination and late penalty charges apply to loans. | There may be yearly international transactions and late payment charges associated with credit cards. |
When to Apply for a Personal Loan
A Personal Loan is a Wise Choice When
- A relatively modest annual percentage rate, or APR, is what you want.
- Low rates accelerate the reduction of your principal while making monthly payments more reasonable.
- Intend to combine sizable, interest-bearing obligations. You can reduce your debt by taking out large loans with fixed payments spread out over several years.
- Need to raise a sizable one-time investment. The expenditure should ideally boost your financial situation, much like a home repair project that raises the worth of your house. It is not intended for personal loans to be taken out regularly.
- Can pay back the loan over time in monthly installments.
- Failing to repay lowers your credit score, just like with credit cards.
Instalment loans, such as personal loans, require you to pay out a specific number of installments. After a certain period, often two to seven years, you will get to repay the loan. You may pre-qualify for a loan with several web-based providers and get the expected rates and conditions without harming your credit score.
Personal loan APRs vary from 6% to 36%. If applicants have strong credit and a low debt-to-income ratio, they may be able to get a rate at the lower end of that range. The best-qualified applicants may be eligible for loans up to Rs 50 lakh from lenders.
Personal Loan Highlights 2024
| Lender | Minimum Salary (per month) | Loan Amount | Loan Tenure | Rate of Interest | CIBIL Score Required | Processing Fees |
| Paysense Personal Loan | ₹20,000 | ₹50,000 – ₹10,00,000 | 6 months – 60 months | 18% – 22% (Reducing PA) | 700 or above | 2% – 5% |
| Werize Personal Loan | ₹12,000 | ₹30,000 – ₹5,00,000 | 12 months – 36 months | 15% – 22% (Flat PA) | 650 or above | 3% – 5% |
| Money View Personal Loan | ₹15,000 | ₹5,000 – ₹5,00,000 | 3 months – 60 months | 17% – 36% (Reducing PA) | 650 or above | 1% – 5% |
| IDFC Bank Personal Loan | ₹20,000 | ₹1,00,000 – ₹40,00,000 | 12 months – 60 months | 10.49% – 22% (Reducing PA) | 700 or above | 1% – 4% |
| InCred Personal Loan | ₹15,000 | ₹50,000 – ₹10,00,000 | 24 months – 60 months | 16% – 33% (Reducing PA) | 650 or above | 1% – 5% |
| Aditya Birla Personal Loan | ₹20,000 | ₹1,00,000 – ₹50,00,000 | 12 months – 84 months | 12% – 28% (Reducing PA) | 650 or above | 1% – 4% |
| Finnable Personal Loan | ₹20,000 | ₹50,000 – ₹10,00,000 | 12 months – 60 months | 16.95% – 30% (Reducing PA) | 700 or above | 1% – 5% |
| Hero Fincorp Personal Loan | ₹15,000 | ₹50,000 – ₹10,00,000 | 12 months – 60 months | 9.5% – 16% (Flat PA) | 700 or above | 1% – 5% |
| Muthoot Finance Personal Loan | ₹20,000 | ₹1,00,000 – ₹7,50,000 | 12 months – 60 months | 14% – 22% (Reducing PA) | 685 or above | 1% – 3% |
| Upward Fintech Personal Loan | ₹20,000 | ₹25,000 – ₹5,00,000 | 6 months – 36 months | 18% – 32% (Reducing PA) | 650 or above | 2% – 5% |
| Cashe Personal Loan | ₹12,000 | ₹10,000 – ₹4,00,000 | 4 months | 1.5% – 3% (Fixed Monthly) | 550 or above | 1.5% – 2% |
| Finzy Personal Loan | ₹25,000 | ₹1,00,000 – ₹10,00,000 | 6 months – 36 months | 10.99% – 18.99% (Reducing PA) | 700 or above | 1% – 3% |
| Fibe (Formerly EarlySalary) Personal Loan | ₹15,000 | ₹8,000 – ₹2,00,000 | 3 months – 36 months | 15% – 30% (Reducing PA) | 550 or above | 1% – 2% |
| Faircent Personal Loan | ₹25,000 | ₹50,000 – ₹10,00,000 | 3 months – 36 months | 25% – 30% (Reducing PA) | 700 or above | 7% – 9% |
| StashFin Personal Loan | ₹20,000 | ₹5,000 – ₹5,00,000 | 9 months – 36 months | 2.45% – 4% (Fixed Monthly) | 725 or above | 2% – 2% |
| Tata Capital Personal Loan | ₹25,000 | ₹75,000 – ₹25,00,000 | 12 months – 60 months | 10.5% – 14.25% (Reducing PA) | 720 or above | 0.75% – 2% |
| Standard Chartered Bank Personal Loan | ₹50,000 | ₹1,00,000 – ₹1,00,00,000 | 12 months – 60 months | 11.49% – 20% (Reducing PA) | 740 or above | 1% – 3% |
| Bajaj Finserv Personal Loan (Prime) | ₹38,000 | ₹1,00,000 – ₹35,00,000 | 12 months – 84 months | 13.5% – 15% (Reducing PA) | 685 or above | 0.5% – 1.5% |
| Axis Bank Personal Loan | ₹25,000 | ₹1,00,000 – ₹40,00,000 | 12 months – 60 months | 11.15% – 16.25% (Reducing PA) | 690 or above | 1% – 4% |
| ICICI Bank Personal Loan | ₹40,000 | ₹1,00,000 – ₹1,00,00,000 | 12 months – 72 months | 10.5% – 15% (Reducing PA) | 700 or above | 0.5% – 1.5% |
| Fullerton Personal Loan | ₹25,000 | ₹1,00,000 – ₹25,00,000 | 12 months – 60 months | 14% – 32% (Reducing PA) | 705 or above | 1% – 3% |
| HDFC Bank Personal Loan | ₹25,000 | ₹1,00,000 – ₹1,00,00,000 | 12 months – 72 months | 10.25% – 16% (Reducing PA) | 700 or above | 0.5% – 1.5% |
| Shubh Life Personal Loan | ₹12,000 | ₹5,000 – ₹2,00,000 | 3 months – 24 months |
Advantages and Disadvantages of Personal Loans
| Pros | Cons |
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How and When to utilize a credit card?
A Smart Option to Use Credit Card is When You
Need to pay for more modest costs. Credit cards are useful for frequent expenses that you can pay back quickly. Particularly if you use your card to earn rewards on regular expenses like supermarkets.
You can settle your debt in full every month. To avoid ever covering interest, paying off your debt completely every month is recommended.
Be eligible for a promotional offer of 0%. The least expensive method of payment for anything is without interest.
A credit card is a revolving credit that permits recurring access to money. Rather than receiving a one-time payment in full, you might charge the credit card up to a certain amount. The standard minimum monthly payback amounts range from 2% to 4% of your balance.
Best Credit Card Highlights in 2024
| Card Name | Standard Reward Point | Welcome Bonus | CIBIL SCORE | Foreign Currency Mark-Up | Interest-Free Period |
| IDFC FIRST BANK WOW CREDIT CARD | 5 Cashback up to ₹1,000 on your first EMI | Nil | 500 or above | No charges | 18 Days – 48 Days |
| ICICI BANK CORAL AGAINST FD CREDIT CARD | Not specified | Nil | 500 or above | 3.50+GST | 18 Days – 48 Days |
| ICICI BANK INSTANT PLATINUM CREDIT CARD | Earn 2 ICICI reward points on every Rs 100 spent except on fuel purchases | Nil | 500 or above | 3.50+GST | 18 Days – 48 Days |
| HDFC BANK MONEY BACK + CREDIT CARD | 2 CashPoints per ₹1 | 500 Cash Point | 750 or above | 3.50+GST | 20 Days – 50 Days |
| HDFC BANK MONEY BACK CREDIT CARD | 4 CashPoints per ₹1 | 500 Cash Point | 750 or above | 3.50+GST | 20 Days – 50 Days |
| HDFC BANK INDIAN OIL CREDIT CARD | 4 Reward Point for Every ₹150 Spend | 500 Reward Point on first Utility bill | 750 or above | 3.5+GST | 20 Days – 50 Days |
| HDFC BANKIRCTC CREDIT CARD | 1 Reward Point for Every ₹100 Spend | Gift voucher worth INR 500 on card activation within first 37 days of card issuance | 750 or above | 3.5+GST | 20 Days – 50 Days |
| HDFC BANKTATA NEU PLUS CREDIT CARD | 5 Cash back as NeuCoins on selected categories on Tata Neu App/Website | 499 NeuCoins on Tata Neu App | 750 or above | 3.5+GST | 20 Days – 50 Days |
| IDFC FIRST BANK WOW CREDIT CARD | 5 Cashback up to ₹1,000 on your first EMI | Nil | 500 or above | No charges | 18 Days – 48 Days |
| ICICI BANK INSTANT PLATINUM CREDIT CARD | Earn 2 ICICI reward points on every Rs 100 spent except on fuel purchases | Nil | 500 or above | 3.50+GST | 18 Days – 48 Days |
Advantages and Disadvantages of Using a Credit Card
| Pros | Cons |
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How Credit Score is Impacted by Borrowing
Anytime you ask for practically any kind of credit, you can anticipate a hard inquiry. Your credit score will typically temporarily decrease by a few points as a result of this.
Keeping up with your credit card or personal loan payments on time will improve your score. The most important component of credit scores is the previous payment history.While paying off debt on time can improve your credit score overall, paying off credit card debt on time may accelerate the process.
This is because of credit usage, or the proportion of the available credit that is being used as revolving credit. It is another important component that affects credit scores. Although paying off a personal loan sum is not beneficial for credit utilization, paying off credit card debt would be beneficial.
When to Select a Loan for Debt Consolidation
A debt consolidation loan is a kind of personal loan that can help you stay on schedule to pay off your financial obligations. If you can find a loan with a cheaper interest rate compared to what you already pay on your debt, that’s a smart alternative.
When Is It Best to Select a Balance Transfer Credit Card?
If you have strong credit and your debt is manageable to pay off in about a year, consider a balance transfer card with a 0% APR introductory period.
These cards might help you pay off the debt interest-free as long as you pay it off within the promotional term, which is normally 15 to 21 months.
Arrange to cover the entire amount before the 0% interest rate period ends. Otherwise, you will be penalized with a double-digit interest charge on the amount that remains.
The savings you realize from consolidating should also exceed the yearly charges and balance transfer charges, which usually amount to 3% to 5% of the total amount.