In India, personal loans and credit cards are two of the most popular financing options. Both these financing avenues have changed the way we perceive and access financing. From being a burden, it became a boon. Today, people opt for these financing options for fulfilling lifestyle improvement and aspirations and meeting their emergency needs. Both these credit options come with their short-term perks as well as benefits in the long run. For instance, an instant personal loan is readily available today against simple eligibility requirements.
When considering the two funding options and the feasibility of one over the other, it is important to know both details. So, below is a detailed insight that will help you determine which one fits you better.
What is an Instant Personal Loan?
As the name suggests, an instant personal loan is a readily available financing option to easily meet your funding needs. The financing is available in a lump sum, and you can meet big-ticket expenditures with the loan suitably. These loans come with set tenures for repayment, extending between 6 months and five years, depending on the lending institution selected. These advances are thus also known as short-term or mid-term loans.
These instant money loans come with low-interest rates, making repayments affordable. You can also repay them in easy EMIs, as the total liability is kept in check through low-interest accumulation. When availing of a personal loan, you can use a personal loan EMI calculator to check affordability and apply for your loan accordingly.
When to use a personal loan?
A personal loan can be a suitable financing option when you need lump sum funding to pay for your expenses. With the best lending institutions, like some popular loan apps today, you can easily avail of a personal loan of up to Rs.1.50 Lakh. The eligibility requirements are basic and easy to meet. The documentation has also been simplified, and you can complete them through online submission.
From paying for emergency medical financing to meeting weddings, travel, and higher educational expenses, and so much more, these loans are available for all financing needs in one. A personal loan can also be a suitable financing avenue if you have business expenditures to meet or pour capital into your newly established venture.
What is a Credit Card?
A credit card is more of a cyclic financial instrument with set utilization limits for credit. A credit card financing arrangement is such that the lending institution provides a hard funding limit for a particular duration, known as the billing cycle. This billing cycle usually extends to one month. You can utilize the amount within this duration as and when your funding needs arise and repay the used amount on the bill due date. The due date usually comes almost 45 days after the commencement of the billing cycle.
The catch in this financing arrangement is that with the total funds utilized in a given billing cycle, the credit limit is reduced by that amount until fully repaid. So, if you miss out on paying your bills for a certain process, it will restrict your credit limit by the due amount. It is, however, a prudent financial practice to make your credit card bill payments on time.
When to use a credit card?
Financing through a credit card is usually suitadailynveniently meeting your daily and recurring funding needs. Even though you can use your credit card for making lump sum payments, it can be very expensive, as credit cards have very high-interest rates. You can also earn cash withdrawals using your credit card, but this facility comes with hefty charges.
How to Determine Which Financing Option is Better?
An instant personal loan and a credit card are entirely different in their modes of operation and repayments. They are also designed to serve other purposes. Thus, the futility of each depends on the financing requirement that you need to fulfill.
Using your credit card for your regular expenses will allow you to review your monthly payments and find ways to save more. For instance, a personal loan is suitable if you need lump sum funding. Contrarily, a credit card is more useful for making regular payments like daily essentials, movie bookings, etc. You can earn reward points and offers on your credit card for such usage. It is also easy to repay this amount at the end of your billing cycle.
However, it would be best to consider the interest rates chargeable on these financing options. Interest rates are significantly high for credit cards than personal loans. So, checking out personal loans would be a smart choice if you want to opt for EMI on your credit card.
You should consider a personal loan if you want to make the repayment over an extended period in the future. A credit card can be your option if the expenditure is easy to fulfill within a month.
Conclusion
With these considerations in place, you can determine whether to pay for an instant personal loan or a credit card to meet your financing needs conveniently. Make sure you have checked the eligibility and document requirements for whichever financing option you choose and apply accordingly for easy approval and disbursal.
Note that instant money loans and credit cards are unsecured financing options. You can use them to fulfill varied needs without any restrictions. However, both are debt instruments, and you must be cautious.
