Personal Loan Vs Credit Card: 4 Points To Keep In Mind
Looking for quick access to liquid funds? Taking on credit can be a great way to meet short-term financial requirements. Over the years, two credit instruments have stood out for their easy accessibility and ability to provide instant liquidity. Personal Loans and credit cards are undoubtedly the two best credit options for individuals looking to gain access to quick and easy funds. Both forms of credit have their advantages and disadvantages. The challenge is to decide which form of credit is right for you. Here are four points to keep in mind before deciding a form of credit of your choice.
#1 Credit Term
If you are on the lookout for short term debt, experts recommend taking a credit card. With short-term debt, you are limited to lower interest rates and other charges levied by banks and lending institutions. One the other hand, if you are looking for a longer repayment tenure to pay back the credit amount, a personal loan is ideal. With most personal loans, borrowers can decide the loan amount and tenure and then make repayments on EMIs (Equated Monthly Instalments). If you are looking to take a credit card where you intend to repay the principal and interest with minimum payments, a credit card is not recommended for you.
#2 Interest Rate
The Interest rates levied is another factor to consider when decided between the two credit instruments. Interest rates charged on credit cards are generally on the higher side. On average, the APR (Annual Percentage Rate) on credit cards is around 20.20 percent. Rate of interest of personal loans on the other hand charges an average interest rate of 9.41%. For individuals with a good credit score, there are a number of low interest-bearing credit options as low as 6.6%. This has a twofold advantage where you can cut CC interest in half all the while becoming debt-free in a shorter span of time.
#3 Ease of Access
Both forms of credit offer easy access i.e. borrowers can approach banks and lending institutions for credit without much hassle. However, it is believed that credit cards are relatively easier to apply for and require fewer documentation. This makes it easy for anyone to apply for a credit card. Although, personal loans are by no means a challenging proposition to get approval. Today, there are platforms like Finserv MARKETS that make the application process a walk in the park.
#4 Fees and Other Charges
Lastly, when considering either of the two credit options, you must take into account additional charges like annual fees, late fees and other ad-hoc charges. Credit cards are notorious when it comes to charging customers extra over and above what they legitimately owe. A personal loan on the other hand is a predetermined amount that has been decided at the time of loan application. The question of additional charges and fees do not apply as long as you pay the EMIs on time.
Depending on your need for quick funds, you should decide between either a credit card or a personal loan. If you are looking for a long-term repayment plan, then hands down you should go for a personal loan. Thanks to platforms like Finserv MARKETS, you can easily apply for a personal loan from the comfort of your home.