Loan against credit card and personal loan usually share common benefits such as instant loan disbursal, zero collateral requirement and no restriction on funds end usage. Hence, selecting between the options can turn out to be a complex task for many.
Discussed here are a comparative analysis between personal loan and credit card loan to help you make a financially informed decision.
- Loan eligibility
Lenders consider various facets of your credit profile when assessing your personal loan eligibility. Major amongst these include your credit score, monthly income, job stability, employer profile and other loan obligations. On the contrary, credit card loan is a pre-approved option approved by the card issuer primarily based on your spending pattern, credit card type, repayment history and credit limit. While issuers can offer credit card loan to just the existing credit card users, lenders can lend personal loan to both the existing and new customers, subject to fulfilment of the loan eligibility criteria.
- Loan amount
Personal loan amount can range anywhere from Rs 50,000 to Rs 25 lakh. The sanctioned personal loan amount basically depends upon your loan repayment tenure and repayment capacity. The borrowed loan can be repaid through personal loan EMI as per your repayment potential. However, in case of credit card loan, you are eligible for a loan amount of just up to the predefined limit sanctioned on your credit card. Credit limit gets temporarily blocked up to the disbursed loan amount once you apply for the credit card loan. Your credit limit gets freed as and when you repay your credit card loan EMI. Note that, there are few card issuers who provide a variant of credit card loan wherein the loan proceeds can be over and above your credit limit.
- Processing time
Before you hit on the personal loan apply button, you must attach a few necessary income documents required for your personal loan processing. These documents include your ITR forms and pay slips. As verification of these income documents may take some time, disbursal of personal loan might take nearly 2 to 7 days. However, few lenders claim to provide faster personal loan disbursal, particularly in the situation of pre-approved personal loan.
As loan against credit card is a pre-approved loan, it generally is processed within the same of the loan application. Few lenders even claim to disburse the loan instantly.
- Rate of interest
Personal loan interest rates can range anywhere between 10.25 percent and 24 percent per annum based on the lender and your monthly income, credit score, employer’s profile, job profile etc. Likewise, credit card issuers even factor in your past repayment record and other aspects linked with your credit profile when setting your interest rate. However, the interest rate of credit cards is usually a notch higher than personal loan interest rate.
- Processing fees
Processing charge of a personal loan can generally go as high as 2.5 percent of the loan amount. For credit card loans, processing charges can go as high as 3 percent of the loan amount. Thus, before you select any of the loan options, ensure to compare the processing charges levied on the personal loan and credit card loan as this charge can make a considerable difference in the loan cost, particularly in the case of a bigger loan amount.
If you are an existing credit card user with an instant fund requirement of a smaller amount, then you can avail credit card loan. Personal loan will be a better choice if you want to avail a bigger loan amount and need a higher repayment tenure. Lower personal loan interest rate can additionally assist in lowering your overall interest cost.
Note that before selecting the personal loan apply online button, you must conduct a thorough research amongst lenders and choose the one offering the best deal. Selection of the lender can be done using the online personal loan EMI calculator.