When you are in need of some cash or credit you may either opt to swipe your credit card or go with the traditional way of taking a loan. However, beyond the many similar attributes of personal loan and credit card loan, they share many differences. Both loans are offered by lenders across multiple platforms through pre-approved loan offers. To pick one judiciously you need to fully understand the purpose of borrowing and the repayment capability. Here we will explore whether one should opt for a personal loan or credit card loan.

• Personal loan offers a lower interest rate

Personal loans are specifically designed for paying over the long term, so the interest rates on these loans are tailored to be fair and conducive to paying off debt. Though the APR on your loan depends majorly on your credit score. Credit cards make very little sense as a long-term revolving debt unless you have a 0% intro APR offer.

• Credit loans instalments are deducted from your card limit

With a credit card loan, your monthly instalments are directly deducted from your credit card spending limit. So, if you’re approved for a monthly limit of Rs.1 lakh on your card and the EMI for the credit card loan goes up to Rs.20,000, the amount of finance you have for other expenses will be Rs.80,000. This means that even if you avail a credit card loan, you will have to compromise on your spending limit. Having a restrictive credit limit on your card will lead to cutting down on other expenses that might be unavoidable.

• Credit card loans attract 18% GST on EMIs

While it may be convenient to accept the credit card loan being offered to you. One major downfall is that you’re charged with 18% GST on your monthly instalments. This charge, alongside the other fees, makes the credit card loans very costly. However, it’s not the same case with a personal loan, this is only levied on the processing fee, meaning that you incur 18% on the 1–2% charge.

• Personal loans help with a structured payment schedule

One of the greatest differences between credit cards and personal loans is the way they are disbursed, and the way they are paid back. Credit card loan repayment is based on the current balance held, which can increase based on your spending and interest for an unpaid balance. You can take as long as you want to pay off a credit card balance, but the longer you take, the more interest you pay.

A personal loan is a great way to discipline yourself to pay off the loan. On the other hand, credit cards are open-ended loans, you don’t have to pay them off at any particular time. If you require a large sum of money it is best to apply for a personal loan. This loan is a quick cash option for your emergency requirements and offers greater borrowing and repayment convenience as compared to a credit card loan, thus making it a better solution to go with.