The expression “Managing your finances” does not always pertain to the investment part of your financials. There are various aspects of inflows and outflows that must be considered to ensure sound financial health. It involves knowing right from investing your money for higher returns to keeping your spending under check, to knowing how to use funds judiciously during certain situations.
The uncertain nature of the modern lifestyle has made financial health an integral part of city life. With most people facing a situation where their expenses are higher than their income, opting for suitable options to finance certain transactions becomes equally important.
With multiple financial products on offer in the market today, the decision becomes a bit tricky. Many individuals ponder over as to whether to use Credit Cards for certain transactions or instead Apply for Personal Loans. The answer to this question is dependant on several factors like the urgency of the situation, the amount required, repayment capacity, interest expenses, etc. When compared on various parameters, Personal Loans offer better financial flexibility as compared to Credit Cards, particularly during financial emergencies.
While the basic need for availing Personal Loans or using Credit Cards is to pay for urgent financial expenses, there are certain situations where availing a Personal Loan is a better option for a Credit Card. Here are some such situations when you must opt for a Personal Loan in place of a Credit Card:
There are many situations for which an individual requires a substantial amount of money. While Credit Cards come with a pre-approved limit, they cannot be used when you need to undertake expenses that run into lakhs of rupees. In such situations, availing a Personal Loan is a much better option. Many lenders are offering high-value Personal Loans at flexible terms. The money can be used for any financial requirement, without any approval required from the lender. So, if you have a need for more than Rs. 5 Lakh, then a Personal Loan is a much better option as compared to a credit card.
For instance, Bajaj Finserv Personal Loan can be availed for up to Rs. 25 Lakh at an attractive interest rate and flexible repayment tenor of up to 60 months, making it ideal for any given situation.
If the situation you are facing does not require you to pay the money immediately, i.e., there is still a few days’ time for you to arrange for the money, you must opt for a Personal Loan. Most financial institutions support online application process for Personal Loans and disburse the amount within a few working days. The annual interest rate applicable against a Credit Card is, usually up to 48% per annum, much higher than what is applicable against Personal Loans, which start from as low as 10.99% p.a.
So, if you have a few days to arrange for the money, then opting for a Personal Loan is a much better option than using a credit card. For instance, when you Apply for a Citibank Personal Loan, available for amounts of up to Rs. 30 Lakh, you get application approval within 4 hours and the amount credited to your account within 48 hours, making it ideal for financial emergencies.
When it comes to Credit Card bills, you must pay the entire dues by the last payment date to enjoy the interest-free period. Otherwise, you will have to bear significantly higher interest cost as the APR for Credit Cards can go up to 48% in many cases. If you cannot pay your entire Credit Card dues by the last date for payment, then you should instead opt for a Personal Loan.
Personal Loans come with an extended repayment tenor of up to 72 months and with interest rates starting from 10.99% per annum. As the repayments have to be made in EMIs, as per the loan repayment schedule, you can easily repay your loan without stretching out your pocket while keeping the interest cost under check at the same time.
This goes without saying; you cannot use a Credit Card for debt consolidation as most people end up in a debt trap due to inadvertent usage of Credit Cards. If you are serving multiple EMIs and Credit Card bill repayments, then only a Personal Loan can save you from the debt trap. You can avail of a high-value Personal Loan and use it to repay your multiple loans and combine the entire repayments into a single one. It not only reduces the burden on your finances but allows you to manage the loans easily.
If you need to pay cash to someone or transfer the money to a person’s or company’s bank account, then using a Credit Card will not solve the purpose. Banks levy hefty interest rates and processing charges on cash advance against Credit Cards, which further adds to your financial problems. Instead, a Personal Loan is ideal for such situations. The lender transfers the entire loan amount to your account, and you can use the money as per your wishes. There is no need for any approval from the lender.
If you have a CIBIL Score of 750+, then you should anyways opt for a Personal Loan as compared to a Credit Card. Such an excellent CIBIL score allows you to avail high-value Personal Loans at the best interest rates and maximum repayment tenor. Therefore, you can take care of any financial requirements without any worries.
While both Personal Loans and Credit Cards are excellent financial products and have their own set of benefits, but their suitability for particular situations depend on a number of factors. Assess your requirements carefully and then select between either of the two.
Also Read: Credit Card or Personal loan: How to Decide?
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