PERSONAL Loan usually is the most common and obvious choice for people during a financial crisis.It is an easy and swift solution that can bail you out of financial emergencies.However,there is another option that most,including credit card holders,are unaware of-loans against credit cards.As most of its feature similar to personal loans,choosing between the two can be confusing.Here’s,comparative analysis that would make your decision easier.
Processing time: Being pre-approved loans,credit card loans have probably the quickest processing time of all loans.All you need to do is cal the customer care number of your credit card issuer or apply online.There is no requirement of any physical documentation.Funds in case of credit card loans,are usually disbured within the same day of application.In case of personal loan ,while an applicant can apply online,he still needs to physically submit his pay slips ITR forms and KYC document to get his loan processed.Disbursal of funds in a personal loan generally take two or seven days.
Eligibillty: Credit card loans are usually pre approved offer for customers on the basis of type of card,spend on card and their bill payment history.Only existing cardholders can avail the credit card loan.The eligibility for a personal loan depends on your credit score,monthly income and other criteria.But,it is mandatory to have a existing relationship with a lender to avail a loam.
Loan amount:The loan amount in case of personal loan usually between Rs 50,000 to Rs 15 lakh. However,the quantum of loan amount will also depend with your repayment capacity and loan tenure.In case of credit card loans,the maximum loan amount wil be limited to available to credit card limit.For example,if the credit card limit is 1 Lakh and you have already spend Rs.25,000 through the credit card,then you can avail a loan up to Rs.75,000 on the card.
Taking a loan on credit card will also limit your future spends through the credit card with the credit limit blocked by loan amount.
Some banks,however,do private credit card loans over and above your credit card limit where the loan amount will not blocked against credit card limit.
Interest Rate:The rate of personal loans can range anywhere between 10.99% and 24% annual,depending on your credit card score,monthly income,employer,loan amount,repayment tenure etc. For loans against credit cards, interest rates are usually between 12% and 18%.
Loan tenure: The tenure for repayment of personal loans usually ranges between 1 to 5 years.The upper limit on most credit card loans is also 5 years; however,the lower limit of the loan tenure can be low as low of 3 monthes.
Processing charges: Processing fees of personal loans ranges anywhere between 0-2.50% of the loan amount.As loan against credit card is usually pe-approved loans,they come with a lower processing fee around 1% .Take into account your total interests cost while using processing fees as per yardstick for choosing between personal and credit card loan.
Hence,opt for a credit card loan if your require fund instantly and your loan amount is small,which your plan is to repay within 12 months.
Apart from zero documentation and instant dispersal ,the certainty for getting the loan approved is higher than personal loan as they come with higher amount and lower interest rate.Moreover,availing personal does not block your credit card limit.
But before making the decision,contact your primary banker and credit card offer online on websites of loans aggregators .