Personal Loan vs Credit Card: Which one is Right for You?

In times of monetary emergency, loans always come to the rescue. But, with numerous banks offering different types of loans, it can get confusing for a user to settle on a specific loan. For short-term emergencies, personal loans are available handy, but not most people are equally eligible for a private loan. Also, consumer loan interest rates are quite high which discourages a lot of potential borrowers. At the same time, a loan on MasterCard is additionally gaining popularity within the market due to its simple nature and straightforward approval.

So, which of the two is better? The solution depends on tons of things including your eligibility for the loans, the quantity you would like, the EMI you’ll afford then on. Before we dig deeper, allow us to first understand both of those loans in some detail.

Personal Loan

Business Asian looking for Personal Loan

A personal loan is often taken for any personal need such as medical emergency, wedding expenses, vacation, home renovation, studies, buying a car, etc. Being an unsecured loan, the speed of interest on personal loans is on the upper side. However, if you’ve got a brilliant credit score and meet other eligibility criteria set by the bank, there are chances that you simply could get an inexpensive rate on a loan. Given below are some common benefits of a private loan:

• You can take this loan to satisfy your immediate individual needs. Banks usually don’t put restrictions on the top use of the private loan proceeds, except for gambling and other speculative purposes.
• The application process is simpler and quicker as compared to secured loans.
• The loan amount can range from a mere Rs 1 Lakh and may go up to Rs 50 Lakh. The loan amount you’ll get depends on your requirement and repayment capacity.
• The repayment tenure of private loans usually ranges from one to five years. However, some banks and NBFCs also give personal loans for an extended tenure say 10 years.
• Though the private loan may be considered a costly borrowing, you’ll get an inexpensive rate of interest, a supported solid credit history, and a lower debt burden on your shoulders.

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Credit Card Loan

Loan on MasterCard is far sort of a consumer loan in several aspects. The loan proceeds are often used to fund a financial emergency. There’s no restriction on the utilization of cash. However, not most are eligible for this loan. Typically, the bank monitors how you’ve used your MasterCard over the past few months. If you’ve made a MasterCard payment on time and maintained an honest utilization ratio, the bank assigns a pre-approved loan amount to you. So, if you’ve already been pre-approved, you can easily avail of the service. If not, this service might not be of much help during emergencies. Nevertheless, the following are a few benefits of loan on credit card:

• Just like personal loans, MasterCard loans are unsecured and hence don’t require any collateral security.
• No additional documentation is required which makes the appliance and approval process easier and faster.
• You get to pay back the loan in easy EMIs over a period of time, decided by you.
• You can apply for the loan directly through the internet banking portal of your MasterCard provider within 3–4 working days,
• You’ll get the quantity. Instant disbursal facility is additionally available with some banks.

Personal loan vs Credit Card

Personal loan vs credit card

Both these loans have their own advantages and disadvantages. The loan you ought to choose depends on your own needs and financial capacity. Here may be a comparative analysis to assist you to create the proper choice.

Since the MasterCard loan amount depends on your credit limit, a private loan makes more sense once you need a bigger amount to fund an emergency. It’s also an excellent choice if you’re trying to find a loan to consolidate your MasterCard debts. Just in case you’re looking forward to applying for a private loan, you want to first use a private loan EMI calculator to estimate the quantity that you simply would need to shed per month if you decide on the loan. You’ll enter multiple values to seek out the proper amount, rate of interest, and tenure that fit your financial capacity.

On the opposite hand, loans on MasterCard are often wont to fund a smaller need. If you’ve got already been pre-approved for a specific amount of loan, there’s a surety that you simply will get your hands on the cash. MasterCard loan is far quicker to avail than the other sort of borrowing which makes it quite beneficial during emergencies. You’ll apply for a MasterCard loan by contacting your MasterCard provider.

The Bottom Line (Personal loan vs Credit Card)

No matter what sort of loan you avail of, always do your research. In the case of a private loan, search for a lower rate of interest; lower processing fee, and better terms and conditions. Though you do not have much negotiation power in case of a MasterCard loan, you’ll still stay informed about what this loan entails. Ask your MasterCard provider to know the fees and the related terms. Financial emergencies can come all of sudden, but you ought to not lose your wit in such circumstances. Be a sensible borrower and make a better choice.