Personal Loan vs Credit Card: Both personal loan and credit card loan come under the category of unsecured loans, so before choosing which option to choose, one should get information about the advantages and disadvantages of both.

The need for money can suddenly come in front of anyone at any time. In such a situation, many people use personal loan, while many people pay with credit card loan. But you should be aware of which option to choose in an emergency situation.

Many times we make immediate payments through credit card, but we do not have much time left to return that amount. Due to which such people get trapped in the debt trap.

Both personal loan and credit card loan come under the category of unsecured loans, so before choosing which option to choose, one should get information about the advantages and disadvantages of both.

1. Rewards points and discounts are available on credit cards

If you use a credit card, you get the benefits of many types of reward points, discounts, vouchers and cashback. But no such offers are available in personal loans.

You can use a credit card to fulfill small requirements like shopping. Or if you can easily pay later for a large payment made through a credit card, then this option will also be right for you.

2. Need for formalities

You already have a credit card, so you can get a loan immediately, but before taking a personal loan, you have to submit some important documents like source of income etc.

3. Bank account is necessary

You must be a customer of the bank from which you want to take a personal loan. In case of taking a loan from a credit card, it is not necessary to be a customer of that bank.

4. This is a big difference between the two

Loans can be taken many times through credit cards. If you take a credit card loan once and pay that amount on time, then you become eligible to take a new loan.

On the other hand, after taking a personal loan once, when you want to take a personal loan again, then you will have to follow all the eligibility rules again. If you take a personal loan again and again, then it can also spoil your CIBIL score.

5. This is the rule for repaying the loan

If you take a loan through a credit card, then you can also get a grace period to repay it. If you pay the loan in that grace period, then you will not have to pay interest.

If a person does not return the amount of credit card loan in the grace period, then he has to pay a huge interest. Due to doing this, many people also get trapped in the interest trap.

There is no grace period in personal loan. Whenever a personal loan is taken, you have to repay the loan in a certain period.

6. Prepayment option

If you take a loan through a credit card, you get a grace period to repay it. This amount can also be paid in EMIs. But customers may have to pay GST, prepayment charges, and processing fees for this.

Talking about personal loans, it is taken for a fixed period and cannot be closed outright before that. If a customer wants to close a personal loan, he may have to pay a penalty.

Which option should you choose between a personal loan or credit card?

If you want to take a small loan for a short period, then the option of the credit card may be right for you. You should take only as much loan through credit card as you can pay in the grace period. If payment is not made in the grace period, then you may have to pay more interest.

If you have to take a loan of a large amount, then a personal loan is better for you.