Personal Loan vs Credit Card: Which is the Better Option for Delhi NCR Residents?

Delhi, the capital of India, attracts people from across the world. Displaying the perfect amalgamation of modern infrastructure and old-world charm, Delhi is also a political epicentre and major economic hub, offering livelihood opportunities to everyone. A cash crunch can impact people, and one can successfully overcome monetary hurdles with a credit card or Personal Loan in Delhi. What is the best go-to option when someone requires money and they run out of funds? Whichever source one chooses, both provide instant cash to cover various needs.

Here, we will understand the difference between Personal Loans and Credit Cards and decide which is the better option for Delhi NCR residents.

What is a Personal Loan?

Personal Loans are unsecured loans that people can use for various purposes. These include expensive purchases, weddings, home renovations, vacations, medical emergencies, and debt consolidation. Borrowers get a lump sum amount after approval, payable in easy EMIs spread across a selected loan term.

What is a Credit Card?

A Credit Card is a revolving credit that allows borrowers to use money from their credit limits and pay the outstanding balance by the month’s end. Borrowers pay interest only if they do not fully pay the credit card bill by the due date.

Differences Between a Credit Card and Personal Loan

Here are a few points of difference between Credit Cards and Personal Loans in Delhi:

· Documentation: Aspiring borrowers must submit necessary documents like address, identity, and income proofs to apply for both Personal Loans and Credit Cards. Both are collateral-free, paperless, and support an online application. Fewer documents might be required if an individual applies for a credit card from their existing financial institution.

· Interest Rate: Since Personal Loans are collateral-free, they pose a higher risk to the lender and attract a higher Personal Loan interest rate. Credit Card users do not pay any interest as long as they pay their bills on time. Interest rate on the outstanding balance is chargeable only when card users fail to clear their account in full each month, far higher than Personal Loans. Interestingly, based on the market situation, interest rates change every new financial year.

· Repayment Tenure: Personal Loans have longer repayment terms than credit cards. When an individual borrows a Personal Loan, they get a few months to years to repay the loan in easy EMIs. On the other hand, credit cards are revolving lines of credit that one can use and clear each month.

· Sanctioned Amount: Lending institutions determine an applicant’s sanctioned amount based on their income, DTI ratio, repayment capacity, and other factors. Once they approve the loan, they transfer the approved amount in a lump sum to the borrower’s bank account. In the case of a credit card, the cardholder gets a credit limit that they can use each month. While NBFCs offer Personal Loans of up to ₹ 10 Lakh, credit limits on credit cards are lower.

· Credit Usage: If an individual gets approved for a Personal Loan of ₹ 10 Lakh, they can use the entire amount for their intended purpose. Using the whole credit limit on a card boosts the credit utilisation ratio and hurts the credit score.

· Additional Charges: Loan providers levy various charges on Personal Loans like late fees and processing fees. Credit cards have more additional charges than loans, like annual charges, APR, cash withdrawal charges and foreign exchange fees.

· Availability of Credit: Loan seekers must approach their loan company every time they need to borrow money. They must formally apply for a loan, wait for approval, and get disbursal if everything goes fine. Credit cardholders have a card in their wallet that they can swipe anytime at a store or use online to borrow money from their credit card company.

When to Use a Credit Card?

It is entirely up to the end user, who can decide if a credit card is something that can serve their immediate financial needs. Those who are still unsure must take a look at the following situations where credit cards are the better match:

– If the card users are sure they can pay off the entire balance within their designated billing cycle to avoid accruing interest

– If they wish flexibility by paying only the minimum due amount

– If hey need urgent funds and are sure of lump sum repayment within a short period

When is a Personal Loan a Better Choice?

A Personal Loan is a better option for those who want more control over their repayment. Unlike a credit card, a Personal Loan in Delhi is easier to avail of because of the increasing competition and straightforward eligibility criteria. Depending on the applicant’s profile, needs, and qualifications, people can borrow Personal Loans customised to their individual needs. The major difference between a Personal Loan and a credit card is that a loan provides a lump sum amount upfront. That is not the case with credit cards that people often use to make instant purchases and pay the entire month’s shopping bills in one monthly bill payment.

The borrower must assess their financial situation to determine if a Personal Loan is the best way out for them. Here are a few instances when Personal Loans prove to be the better funding options:

1. When the borrower needs a longer period for repayment
2. When they need funds to make multiple big-size cash payments
3. When they want a tangible option for debt consolidation

Credit Card or Personal Loan – Which is the Better Option?

From an external perspective, both Credit Cards and Personal Loans look similar. While an individual can borrow funds from both options and make repayments at their convenience, the lower Personal Loan interest rate is the key differentiator between the two. The lump sum amount access, easy repayment in EMIs, and lower interest rates are a few things that make Personal Loans better than credit cards. On the other hand, timely credit card bill payments will ensure you never have to pay any kind of interest, making a card far more useful than a loan.

Are you looking for a Personal Loan in Delhi? Compare loan offers from different loan providers, check their eligibility conditions, and apply for one online. Use online tools like eligibility and EMI calculators to make informed decisions and get the most out of the funding option.

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