Many times we suddenly need money. If you have not arranged for an emergency fund, then usually you have two options left. Credit card or personal loan. Both of these are unsecured loans because in this you do not need to mortgage anything. In such a situation, the question arises whether a credit card should be used in an emergency or it would be better to take a personal loan.

Advantages and disadvantages of credit card
Today credit cards have become an important part of most people's lives. You can also do shopping along with important bill payments. You can also withdraw cash from an ATM with a credit card, but you may have to pay a lot of charge on it. However, you can pay rent and school fees with a credit card with a fixed charge. On this, you get the benefits of reward points, gift cards, vouchers, discounts, and cashback, which are not there in personal loans.

In this
Credit card you get a fixed time to repay the loan. This can be up to a maximum of 45 days according to your billing cycle. If you repay the dues during this time, you will not have to pay any interest. But, in case of default, you may have to pay a huge interest, which varies according to the bank.

How right will it be to take a personal loan?
If you need a lump sum of cash, you can take a personal loan. In this, you have to complete some necessary paperwork and the bank checks your ability to repay the loan. After your profile is cleared, the bank will transfer the loan amount to your account. In this, you may also have to pay processing fees, which vary according to the bank.

However, you should keep in mind that the interest rate of a personal loan can be much higher than a home loan and auto loan because it is an unsecured loan. Also, you cannot close it by paying a lump sum amount before a certain time. In case of doing so, the bank can also charge you a penalty in the form of a pre-payment charge. Also, GST is applicable on personal loans.

Which is better between credit card or a personal loan?
The answer to this depends on your requirements. If you need 20-30 thousand rupees for a short time or have to make purchases for marriage etc., then you can use a credit card. This means that a credit card is good for small amounts and short periods. If you spend a large amount from a credit card and are unable to repay it on time, then the high interest rate can trap you in a debt trap.

If you need a large amount for a long time and are unable to arrange money from anywhere, then you should opt for a personal loan. In this, you get more time to repay the loan. You can also increase or decrease the EMI according to your income. This makes it easier for you to repay the loan.