Crisis always comes unannounced. And whilst one might not be able to do much in case of mental or physical ones, you can still face a financial crisis with a sound mind and firm decisiveness. One such step towards making a level-headed judgement is knowing the concepts of loans (personal and credit card) and fundamental differences between them.Â
It is imperative to understand these primary variants of loans and knowing which category is suited for which circumstance. Also, whether you can apply for them whilst you have taken loans like a business loan or others.
Hence, let’s dive deeper into them.
Personal Loans
Secured (collateral required) as well as unsecured (no collateral), these types of loans can financially aid when you need immediate funding, especially if you don’t possess a credit card. You can apply for this type of loan through offline (financial institution) as well as online modes (like an online loan app).
Such loans are beneficial in conditions when you need a considerable sum of money to make payments to another party and have at least a week to decide and choose a loan. It is because although their processing time is not slow, it might take three to four days for verifying your documents and then approving your loan.
Hence, these are preferable when you have some time in your hands to choose and decide calmly. You can even apply for it after you take a home loan to support your other finances as well.
Credit Card Loans
These types of loans are instantaneous, which means that the lender will deposit the loan amount in your account within 24 hours of your applying. They are incredibly helpful in emergencies where you can’t even spare a second and have no other way to produce such an amount of money.
You can apply for this loan after taking a home or business loan as well. But when vice-versa, remember that your credit score and debts will affect your eligibility for applying for other loans.
Which One is Better?
Both types of loans have their advantages and disadvantages. Depending on your state and circumstance, you must decide which one suits you the best.
Refer to the following table for knowing the key differences between both types of loans:
| Key Difference | Personal Loans | Credit Card Loans |
| Applicant | People who are not customers of particular financial institutions can also apply for this. | Must be a credit cardholder. |
| Approval Time | It might take up to three to five business days. | They are processed within 24 hours of applying. |
| Application Method | You can approach a financial institution with documents or even apply through an online loan app. | You can either apply for it or accept a pre-approved offer given to you by your financial institution.You can also apply for the same through loan apps in India. |
| Disbursement Method | To your current/saving’s account or in the form of a cheque. | To your current/saving’s account (in the same financial institution) or in the form of a cheque. |
| Repayment Method | EMIs are made to your lender or financial institution for a chosen tenure. | EMIs are added to your monthly credit statements for a chosen tenure. |
| Repayment Tenure | One to five years | One to five years |
| Borrowing Limit | It is chosen by your lender based on your credit history, reliability, income, expenditures, etc. | Up to the limit set on the credit card by your provider |
| Interest Rates | 10.50% onwards | Comparatively higher than personal loans |
| Documentation | Identity proof, income proof, financial statements and address proof. | No documentation required as such |
It is evident from the table that although you can apply for both of these categories after taking a home loan, they have their pros and cons. Whilst the credit card loans are instant and require no documentation, on the other hand, personal ones have lesser interest rates and can help you borrow more money.
There are many loan apps in India like Bajaj Finserv App, which allow you to apply for a loan within seconds whilst relaxing in your home.
Conclusion
Loans are an incredible way of financing yourself in times of crisis and economic instabilities. The two most popular types: personal and credit cards are suited for different occasions. The former one is used when your loan amount is high, and you can wait for a week to avail it. The latter is preferred when the loan amount is less but is needed on an urgent basis.