Both credit card and personal loan can be beneficial for you if utilized judiciously. They have some key differences and learning more about their benefits will help you secure the best option for yourself. So, let’s find out about some basic differences between credit cards and personal loans.

Credit card and personal loan are unsecured loan options. You can easily utilize them both for your financial needs. However, it is important to educate yourself about the major differences between them.

Six essential points to understand the differences:

#1 With a credit card, you can take loans without reapplying for them. Whereas with a personal loan, you must submit a new request when applying for a new loan. Your application is reviewed each time when taking a personal loan. 

#2 Applying for multiple personal loans can impact your CIBIL score. Financial experts recommend refraining from constantly applying for loans to reduce the financial burden and maintain trust with the bank or the institution. 

#3 Credit card offers a grace period during which the borrowers can repay their loan without incurring more interest charges. Personal loan does not offer this option, and the borrower is required to make regular EMI payments. 

#4 When applying for a personal loan, you have to complete formalities and submit various documents for verification. Credit card approval is often less stringent in this regard. 

#5 Credit cards often offer additional benefits like reward points, gift cards, vouchers, discounts, and cashback. However, personal loan does not come with these benefits.

#6 Credit card has a grace period to adjust the EMIs. However, these may also include charges such as processing fees, prepayment fees, and GST. On the other hand, penalties may apply for making lump sum payments on personal loans. Every bank or lender offers different benefits, so it is essential to consider various options before making the final decision. 

Which one is better for you?

According to financial experts, for short-term loans, a credit card may be suitable. For larger loan amounts, opt for a personal loan. The best choice depends on your financial goals.

Also read:Financial Health: 6 credit card mistakes you must avoid 

5 things to keep in mind before applying for a personal loan 

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