When it comes to financing your expenses, many options are available in the market. Two of the most common ways to borrow money are through personal loans and credit cards. While both of these financial products have advantages and disadvantages, it’s essential to understand which is better suited for you. In this article, we will explore the differences between personal loans and credit cards to help you make an informed decision.
Personal Loans: An Overview
A personal loan is an unsecured loan that you can use to meet various expenses such as medical bills, home renovation, education, and other personal needs. Personal loans come with a fixed interest rate, and the repayment tenure varies from one lender to another. ApnaPaisa Loans is one of the leading brands in India that offers a wide range of personal loans at competitive interest rates.
Credit Cards: An Overview
Credit cards are another popular way to borrow money. They provide you with a revolving line of credit, which means you can borrow money up to a certain limit, replenishing the amount as you make payments. Credit cards also come with a variable interest rate and have different features, such as cashback, rewards, and discounts on purchases.
Personal Loan vs Credit Card: Which One to Choose?
Here are some key differences between personal loans and credit cards to help you decide which one is better suited for you.
The interest rates on personal loans are typically lower than on credit cards. Personal loans have a fixed interest rate, which means you will pay the same amount of interest throughout the loan tenure. On the other hand, credit cards have a variable interest rate, which means the interest rate can fluctuate depending on market conditions and other factors.
Your credit score plays a crucial role in getting approved for both personal loans and credit cards. However, personal loans are generally more lenient towards applicants with a lower credit score than credit cards. This is because personal loans are secured against your income, whereas credit cards are unsecured, which makes them riskier for lenders.
Personal loans allow you to borrow a larger amount of money than credit cards. The maximum loan amount for personal loans can go up to 50 lakhs, whereas credit cards usually have a credit limit of 1-2 lakhs. If you need a large amount of money, a personal loan is a better option.
Personal loans come with a fixed repayment tenure, usually 1-5 years. On the other hand, credit cards provide a revolving line of credit, and the repayment tenure is flexible. However, credit card interest rates can be high, making it difficult to pay off the balance.
Personal loans come with a processing fee and prepayment penalty, a percentage of the outstanding loan amount if you want to pay off your loan before the due date. Credit cards also come with various fees and charges, such as annual fees, cash advance fees, and late payment charges.
Which One is Better Suited for You?
If you need a large amount of money and have a good credit score, a personal loan is a better option as it comes with a fixed interest rate and a longer repayment tenure. However, if you need a small amount of money and can pay off the balance monthly, a credit card can provide additional benefits such as rewards and discounts.
Both personal loans and credit cards have their advantages and disadvantages. It’s essential to consider your financial situation and repayment capacity before choosing either of them. If you’re unsure which one is better suited for you, you can consult with a financial advisor or speak to the customer support team at ApnaPaisa Loans to help you make an informed decision. Before deciding, remember to compare interest rates, repayment tenure, fees, and charges.