personal loans

A personal loan is one of the most convenient types of credit since it allows you to borrow a significant sum of money without having to put up any security. 

Personal loans and credit cards are both ways to borrow money and share many of the same credit terms. Both loan and credit card agreements often include cash supplied from a lender at a set interest rate, monthly payments that include principal and interest, late penalties, underwriting requirements, amount limitations, and other terms. Misusing either sort of credit can hurt your credit score, making it difficult to get loans. However, there are some significant distinctions between personal loans and credit cards, such as repayment conditions. Let’s look at the definitions and differences between the two, as well as the advantages and disadvantages of each.

Personal loans

Personal loan in India can be used for a number of things. An unsecured loan can be used to finance significant expenditures, consolidate credit card debt, repair or improve a home, or bridge a financial gap caused by a change in income. Unsecured loans are those that are not backed by the borrower’s pledge of collateral.

Within the personal loan category, lenders offer a variety of options that can affect credit terms. The long-term balance is the key distinction between a personal loan and a credit card. Unlike credit cards, personal loans do not allow ongoing access to funds. A borrower receives a lump sum payment up front and has a set amount of time to return the loan in full through scheduled payments and pay it off. This arrangement normally comes with a lower interest rate for borrowers with a good to high credit score.

Pros and cons of personal loan


  • Personal loans are best for large purchases. 
  • Generally offers a lower interest rate than credit cards.
  • Offers funds in one lump sum.


  • Personal loans usually offer service fees and many other fees.
  • Property used as collateral can be seized if you don’t repay in a timely manner.

Keep in mind that interest isn’t the only cost to think about when taking out a loan. Fees are often charged by lenders, which can add to the total cost of a loan.

Credit cards

Revolving credit, which includes credit cards, is a separate type of borrowing. A revolving credit account provides the borrower with continuous access to funds as long as the account is in good standing. Credit-limit increases may be available on a regular basis for revolving credit card accounts. Interest rates are often higher than those on personal loans.

Credit card loan

A credit card loan is a pre-approved loan that does not require any paperwork. It’s the most convenient way to get unsecured credit. In this type of loan, a portion of your credit card limit that has not been spent is supplied as a loan.

Credit cards come in a variety of forms, and they provide a lot of convenience.   The finest credit cards may provide introductory interest rates of 0% for a limited time, balance transfer options, and rewards. These reward points can be highly beneficial for a borrower who utilizes the perks and pays balances down monthly. 

Personal Loan vs Credit Card

A personal loan is not the same as revolving credit. Borrowers have access to a certain amount of money, but they do not receive it in full. Rather, the borrower can withdraw funds from the account at any moment, up to the full limit, at their discretion. Borrowers only pay interest on the funds they use, therefore a borrower with no balance could have an open account with no interest. 

Credit cards can be unsecured or secured in general. Unsecured credit cards provide credit without requiring a deposit. Secured cards are frequently used by individuals with bad credit. A secured card requires the borrower to contribute capital to the card’s balance limit. Secured cards come with a variety of terms, such as matching the secured balance, offering an increase after a certain period of time, and applying the secured balance to the card as a payment after many months.

Overall, each form of credit card will accrue interest in its own method, so it’s critical to read the tiny print. Unlike personal loans, where your monthly payment remains consistent throughout the payback period, your credit card cost will fluctuate month to month.

Some credit cards provide borrowers with a statement cycle grace period during which they can freely borrow funds. Other credit cards carry daily interest, as well as a monthly interest payment at the end of the month. Borrowers with credit cards that include a grace period may have up to 30 days to purchase something interest-free if the balance is settled before interest accrues.

Pros and cons of credit card


  • Ongoing revolving credit balance with interest only charged when funds are used
  • Cards featuring 0% introductory interest rates, grace periods, and prizes are available to consumers with solid credit.
  • Credit limits are routinely increased on a regular basis for accounts in good standing.


  • Interest is typically higher than personal loans and there might be fees.


Overall, financing with a credit card may appear to be a straightforward option, but as with any borrowing, it is critical to do your homework. Credit cards can be a good option for personal loans because they often have zero percent interest rates and grace periods. Other benefits include convenience and reward points. However, like with any form of credit borrowing, interest and fees may add up quickly.



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