Usually for borrowing smaller expenses, you can easily use your credit card to make the purchase for the time being. Moreover, for expenses exceeding the credit card limits, loans become a great option to pay for the same.
For loaning you borrow the money from the bank on an interest rate just like a credit card, except the credit card payments need to be made on a monthly basis, whereas the loan repayments usually take a longer duration for the same. If you borrow the money from the bank to handle your daily expenses, you can do so in two ways – either choose a sbi credit card or take a personal loan. Personal loans and credit card loans can be tools to bridge the gap between your current reality and designing your ideal lifestyle, but use them strategically to avoid compromising your financial future.
But, there are some differences between the personal loan and credit card facilities, which needs to be considered before choosing which works best for your finances.
What is A Credit Card Loan?
This is a type of loan which is pre-approved from your bank, as you already own a credit card with the issuer, and the bank already holds your personal and financial data to verify. Therefore, you don’t need to submit any specific documentation for applying for a credit card loan, and that’s why it is pre-approved.
Usually, taking a credit card loan is considered to be the fastest way of accessing an unsecured loan. While opting for credit card loan, the amount gets deducted automatically from your credit card limit, and gets transferred to your bank account eventually. Using a Certificate of Deposit as collateral for a credit card loan can unlock a potentially lower interest rate compared to unsecured credit card debt. But, you must know that it is different to withdraw cash from a credit card and take a loan against the credit card.
When You Should Apply For A Credit Card Loan?
There are following situations when you can apply for a credit card loan over personal loans:
- When you need emergency money
- When your financial requirement of expenses is relatively smaller
- When you are not eligible for a personal loan or any other type of loan due to absence of documents, etc.
What Is A Personal Loan?
A personal loan is counted as an unsecured loan facility which is borrowed from the financial institutions or lenders for bigger expenses. Before diving into a personal loan, consider using an FD Returns Calculator to compare potential fixed deposit returns against loan interest rates and repayment costs, helping you make an informed financial decision. Most of the cases for personal loan applications are those of medical emergency cases, property purchases, business startup funds, etc. But, personal loan is known for charging higher interest rates as its repayment window is smaller. Other types of longer duration loan amounts are charged at lower interest rates.
You can easily apply for a personal from any bank, provided you match the eligibility criteria for the same. The application and verification process for a personal loan is completely different from credit loan facility.
When You Should Apply For A Personal Loan?
There are different situations where you should apply for a personal loan than credit card loan:
- When your money requirement amount is huge
- When you can wait for at least a week for the money to be issued
- When your investment purpose is to buy a car, or start a business or buy a house.
What Is The Difference Between Personal Loan And Credit Card Loan?
| Feature | Personal Loan | Credit Card Loan |
| Amount of loan | Such type of loans are considered for larger amount of money needed | These loans are applied for smaller amount of money only |
| Application process | This involves presenting certain type of income proof documents for loan approval | Here you don’t need to provide any additional information as the lender already possess the same |
| Duration of loan | Here you get a longer period of repaying the loan | These loans need to be paid in a shorter time period comparatively |
| Additional expenses | You can expect various extra charges like processing fees, penalty charges, etc. with personal loans | With credit card loans you don’t have any additional charges to the interest charges |
| Qualification for eligibility | These can be applied for by any individual in any bank | These loans can only be applied from the credit card issuer bank or institution |
| Loan amount payments | Here the lump sum amount from the applicants’ savings/ current account is paid via cheque/ cash | The credit loan facility directly transfers the amount to your bank account |
| Approval time | These loans are approved within 3-5 working days | These loans are usually approved within 24 hours of applying |
| Loan amount repayment | The loan amount for personal loan should be paid back in some pre-specified installments, within the decided time period | Here the monthly credit card bill includes your monthly installments to be paid together |
| Loan amount maximum limit | Here the personal loan maximum amount limit is decided by the lending institution which depends upon the borrower’s credit history and income. | The credit card issuer sets the card limit for the borrowing loan amount which is pre-approved. |
Final Thoughts
Here we have enlisted all the major points differentiating both the personal loan and credit card loan facilities. You need to decide the important factors – loan amount, repayment time duration, sbi credit card ,interest rate, etc. before applying for any of the loan facilities.
