Whenever there’s a financial requirement people opt to get a loan. Credit card loans and instant personal loans are the two types of loan available when you require funds. However, choosing one option might be quite confusing as both the loans come with their own set of advantages and disadvantages. Hence, you should pick either of the options only after fully understanding the purpose of the loan and your repayment capability to avoid making hasty decisions and regret it later. Here are the things to consider before choosing your loan option.
Eligibility of the loan
To be eligible for an instant personal loan you need to prove your credibility as a borrower. The lender approves your loan application only after running a background check on your credit history that contains all your financial details. This way the bank concludes whether you are responsible with your payment and will repay the loan on time. Credit card loans on the other hand can be easily availed against the unused credit limits on any credit card. No further documentation is required to avail this loan. It is one of the fastest ways to get funds.
Interest rate on loans
For personal loans the rate of interest depends on the borrower’s credit history. If you have a good CIBIL score and not many outstanding debts, there are chances you could get a low-interest rate on the loan amount. On credit card loans you can get interest rates ranging between 10 and 18 per cent. If you’re an existing customer with the credit card company you can even negotiate a lower interest rate.
Documentation & Disbursal process
A credit card loan does not require any documentation, if the borrower is already an existing customer with the credit card company. The loan amount disbursal process for credit card loan is quicker if you hold a savings account with the same bank which is convenient in case of instant fund requirements. Personal loan documentation includes the applicant’s identity proof, bank statement of the last six months, ITR of the last 3 years, along with PAN, and address proof, for both salaried or self-employed. The loan disbursal process for personal loans takes longer as it requires documentation and has a due process compared to credit card loans.
If you require a small amount. The loan amount, however, will depend entirely upon the credit card limit provided by the company. Applying for a loan more than your card limit may lead to rejection of your loan application. The loan amount of a personal loan ranges from as low as a few thousand rupees to a couple of lakhs. Hence, a personal loan gives you greater leverage. The amount approved will be based on your credit profile and repayment capability.
Personal loans come with a repayment period ranging from anywhere between 1 and 5 years, which makes it easier for the borrower to repay the loan. With a Credit card loan, the loan repayment tenure is shorter ranging from six to 36 months. Hence, it is best to use this loan for making small purchases.
Now that you are well aware of the loan options available to you and what it has to offer. Ideally, if you require a large sum of money you can opt for an instant personal loan. In case of smaller amounts credit car loan would be a much favourable option. You can now decide whether a personal loan or a credit card loan would work well based on your financial requirements.
Smriti Jain is the owner and senior content publisher at Financesmarti. Financesmarti is a website where she shares a lot of useful stuff for the people and business of India. This includes small business ideas and other banking information, as well. Smriti completed her education in science & technology from Delhi University. Smriti usually has interests in digital marketing now, and she has chosen this career for the full-time opportunity. The primary purpose of starting this blog to provide quality information on the banking industry to the people.