Personal Loans and Credit Cards, both are types of unsecured loans. But they are not the same. Almost everyone uses debit and credit cards these days. The question is, however, what is the difference between a credit card and a personal loan and which one is better for you. Read on to know and compare personal loans and credit cards in detail.
To begin with, personal loans are a type of loan given by an institution like a bank or an NBFC(Non-Banking Financial Company) for miscellaneous purposes. Unlike home loans and car loans, there is no restriction on the end usage venue for personal loans. However, being non-collateralised in nature, they carry higher interest rates in comparison to collateralised loans.
Credit cards are tangible debt instruments that allow the user cum borrower to buy a good or service from anywhere where the card is accepted as a payment mode. The payment towards that good or service is done by the credit card issuing company on behalf of the credit card user. Here the user has to pay back the borrowed amount within a certain period, which is usually a month.
Both of these instruments are primarily unsecured credit or debt. In the market, there are also secured forms of personal loans and credit cards, but today we would stick with the former form of these debt instruments.
Below are some pros and cons of credit cards and personal loans, which could help you in gaining an insight into the difference b/w both of these products.
Personal loans could be helpful in case of last hour emergencies, where the need for cash is immediate. For example, hospital expenses, immediate cash requirements for your business, etc.
While a credit card is helpful for having a single bill for an entire month’s expenses.
In both of these instruments, disciplined usage and repayment are essential, the lack of which would affect your chances to avail yourself of any further credit in future.
Before you go…