Data sourced from the Reserve Bank of India denotes an overall increase in the personal loan portfolio by about 20.4% between 2017 and 2018. Such an increased growth is primarily due to the easier disbursal of such advances by lenders at more beneficial loan terms.
Benefits of a Personal Loan Over Credit Cards
⦁ Higher amount of credit
One of the top reasons to avail an personal loan is that borrowers can avail a substantial amount of credit on these schemes when compared to credit cards. On the basis of your eligibility, financial institutions offer loan amounts of up to Rs.25 lakh.
Credit cards come with a maximum utilisable credit limit. This limit is set by the card issuing company consistently based on the cardholder’s monthly income. So, it is rarely possible for a credit cardholder to avail credit equal to a personal loan with such a card.
⦁ Absence of additional charges
While availing a personal loan from a reliable financial institution, you are not required to pay any additional charges. Personal loans with top lenders provide complete transparency and come with no hidden charges.
In case of credit cards, cardholders may be required to pay annual fees. Other charges may also be applicable including processing charges for cash withdrawals. There are no such charges applicable on a personal loan other than the processing charges upon loan disbursal.
Some additional charges may apply on a personal loan which such foreclosure or part-prepayment charges when you opt for such facilities. However, details of these charges are provided to the borrower beforehand.
⦁ Flexible tenor
If you have a decent FOIR ratio added with a substantial credit score, financial institutions offer long tenors to borrowers ranging up to 60 months. So, loan repayment becomes easier with the facility of a flexible tenor. Borrowers should learn how to use a personal loan calculator to determine their loan EMIs with ease.
Credit card issuers allow cardholders a limited time to pay their monthly dues. The due date of a monthly credit bill is generally 15 to 20 days over and above the statement date.
⦁ Lower interest rate
If you are unable to pay your credit card dues on time, credit card issuers will charge a high rate of interest on the carried balance as a penalty. Substantial interest rates as high as 45% per annum may apply on outstanding dues.
Interest rates on your credit card dues are compounded monthly compared to single term credits such as personal loans. Moreover, if you possess a high credit score and substantial income proof to meet the demands of the personal loan eligibility criteria, financial institutions can offer relatively lower interest rates on the loan.
Before applying for a personal loan vs credit card, an individual should compare the multiple offers provided by financial institutions. NBFCs like Bajaj Finserv bring forth pre-approved offers that make availing loans and credit cards quick and easy. Such offers are also available on other financial products like home loans, business loans, etc. Check your pre-approved offer after providing your name and mobile number.
Both personal loans and credit cards can be beneficial in different circumstances. Credit cards offer the facility of availing short-term credit instantly while personal loans provide flexibility in credit repayment over a longer tenor.
Find Latest Jobs Here