Which Is Better for Emergency: Credit Card Loan Or Personal Loan?

Which Is Better for Emergency: Credit Card Loan Or Personal Loan?

Are you in double mind about the best way to draw a bank credit for emergency? Should you use your Credit Card to avail of Instant Loan or use a Personal Loan pre-approved offer? Unable to make the decision! Look no further. We are here to help you make smarter financial decisions for your future.

First things first a Bank Loan is a debt and has an additional cost attached. Thus, you should always pre-define what, why and how of a loan you seek. What amount do you need? Why you want it? And how you plan to repay it?

With these 3 clear answers you will know about tentative loan quantum, tenure and the EMI-size.

Next comes, an external part. Comparing different products and choosing the best one for your profile. So, let’s discuss two instant financing options: Personal Loans and Loans on Credit Cards.

Personal Loans vs. Loans on Credit Cards

Personal Loan is an unsecured term loan that can be availed as per your Credit Score and NMI/EMI ratio for up to 5 years from a bank, NBFC or any of the financial institutions. However Credit Card Loans are Term Loans raised against the credit limit approved on your Credit Card by the card provider. Both forms of loans are instant, contactless, and hassle free. However, the decision could be a bit tricky one when you are pre-approved for both. For example: You are an SBI cutomer and have an SBI Credit Card and an SBI Personal Loan pre-approved offer in your dashboard.

So, it is important to compare the two options and know which one suits your situation and why:

Parameter Personal Loan Loan on Credit Card

Type of Product


Unsecured, precisely loan against card limit.

Purpose of Loan

All-purpose loan, no restriction

Though it is also an all-purpose loan, you should however apply only for urgent needs


Aadhaar & PAN required

Ownership of Credit Card required; no other document needed if you are preapproved for this facility.


Rs 50000 to Rs 40 Lakhs, varies across lenders

Quantum is lower compared to Personal Loan; also restricted up to your card limit approved.

Processing Time

Instant to same day


Interest Rate

Starting from 10.30 % p.a.

Higher than Personal Loans; starting at 1.25% per month


Up to 5 years

Up to 1 year; can be extended

Ideal for

Short to medium term needs

Very short term needs

Online Application



Repayment Flexibility

EMIs to be served as per repayment schedule shared by lender

EMI reflects in monthly Credit Card Statement


Preapproved customer-offer; New customers can also apply

Preapproved offer for select customers only

Thus, opt for Loans on Credit Cards in following situations:

  • When you need instant cash within your card limit.
  • When your card qualifies you for a preapproved offer.
  • When you need Short Term Loan for a few months.
  • When you are not eligible for Personal Loan.

On the other hand opt for Personal Loan:

  • When you need high loan amount, more than the card-limit.
  • When you want to repay loan in more than 8-9 EMIs. You can avail Personal Loan for up to 5 years.
  • When you need lump sum amount for personal or business payment.
  • When you want to borrow & build credit score by repaying EMIs each month.


✅ Which is better Personal Loan or Loan on Credit Card?

Your financial situation and precise needs for funds will determine which is a better loan instrument for you among Personal Loan or Credit Card Loan. Both are unsecured and fast loaning options. However, Personal Loans are ideal for high-ticket & long term commitments, while Credit Card Loans are ideal for small and short term requirements.

✅ How do Personal Loan and Credit Card Loan hurt my CIBIL Score?

When you avail of any type of loan or bank credit, it reflects on your Credit Information Report. As far as you are regular in monthly repayments, you will build a good score because of this financial history. However missing EMIs will have a negative impact on your score.

✅ What are the benefits of Credit Card Loan?

There are multiple benefits of Credit Card Loans. These can be applied 24X7 using online mode of application. There is no documentation required. If you have even been regular on repaying Card bills, chances are high that you are eligible for a Credit Card Loan. Some banks also allow opting for balance transfer at 0% interest while extending the repayment tenure.

✅ What are the disadvantages of Credit Card Loans?

Though Credit Card Loans are Instant Loans, there are a few drawbacks that need your attention. The rate of interest is usually much higher than Personal Loans and thus these loans should be repaid in the shortest possible time span. The APR could be high. It also blocks the card limit and this hurts the cash flows at times.

✅ What are benefits of Personal Loans as against Credit Card Loans?

Whether you own a Credit Card or not, you can apply for Personal Loan but the same is not the case with Card Loans. Also, you can apply for Personal Loan to new lender. The past relationship with the bank is not compulsion. Next Personal Loans are available for larger amount, longer duration and that too at lower rate of interest.

✅ What are downsides of using Personal Loan against Credit Card?

A Personal Loan is a Term Loan, and you need to stick with repayment schedule or else a foreclosure charge is applied. So, right from the first month you are required to pay out interest cost with EMI. However in case of Credit Cards, you get 45-55 days of free period. If you pay out within this range, your transaction comes with no interest cost. Also, there is no foreclosure charge with Credit Card Loans. Some documents would always be required to apply for Personal Loan, however your card provider will sanction loan against card without any documents. You just need start an application and share your consent.

✅ What are the ideal situations to use Personal Loans?

You should opt for Personal Loan when you need high loan for longer duration. Another determinant could be the purpose of loan. When you want funds for various personal and business expenses, a Personal Loan could be a better instrument for you. You can also use Personal Loans as a debt consolidation tool.


Also read: Loan on Aadhaar Card – Impact of Aadhaar Card on Personal Loan


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Category: Credit Card    Personal Loan