Personal loans vs credit cards: which is right for you?

Posted on Friday, August 11th, 2023 | By IndusInd Bank

Financial decisions can sometimes be confusing, especially when it comes to choosing between a credit card and a personal loan. But don’t worry, we’re here to help you understand these options. Let us take a look at the differences between credit cards and personal loans. This blog will help you figure out which one suits your needs. Learn about these financial tools and make wise choices for your money. Let us understand the features and benefits of credit cards and personal loans.  

Understanding credit cards

A credit card is a financial instrument that allows you to borrow money against a pre-approved credit limit for purchases or cash withdrawals.

IndusInd Bank provides a completely digital process to apply for credit cards online, making them accessible and easy to apply for.  

Some features of credit cards include:

• Reward points: You earn reward points every time you use IndusInd Bank Credit Cards. These points don’t expire and can even be converted into cash credit, which can then be used to pay off your credit card bills.

For example, with the IndusInd Bank Nexxt Credit Card  , you earn 1 reward point for every ₹150 spent.

• Premium memberships: IndusInd Bank Legend Credit Card offers a complimentary priority pass membership that helps you enjoy access to 600+ lounges across the world..
  
• Forex benefits: IndusInd Bank Legend Credit Card provides discounted foreign currency mark-up at 1.8% for foreign currency transactions on your primary and add-on cards. On the other hand, the Club Vistara Explorer Credit Card offers zero foreign currency mark-up on all your international spends, so you don’t have to worry about paying extra on your international trips.

These features make IndusInd Bank Credit Cards an excellent choice for regular expenses and short-term borrowing.

Understanding personal loans

A personal loan is a lump sum of money that you borrow from a bank or other financial institution, which you agree to pay back in regular installments over a specified period.

Key features of IndusInd Bank Personal Loans:

• Digital process: The application process is entirely digital and paperless, making it convenient and quick. You can avail of a personal loan right from the comfort of your home.
• Low interest rates: IndusInd Bank offers interest rates starting from 10.49% p.a.
• Flexible tenures: You can choose a suitable tenure ranging from 12 to 48 months, according to your repayment capacity.
• Sizeable loan amounts: You can borrow an amount ranging from ₹30,000 to ₹5 lakhs based on your requirement and eligibility.
• EMI calculator: IndusInd Bank’s Personal Loan EMI Calculator helps you plan your monthly budget efficiently. You just need to enter your loan tenure, amount and interest rate into the calculator, and it will show you the monthly EMI within seconds. You can even try out different variations to arrive at an EMI amount that suits your budget.
• Minimal documentation: You only need to enter your PAN and Aadhaar details to apply. This makes the application-process hassle-free since it doesn’t require you to input/upload multiple documents.

Personal loans can be used for any purpose and can cover various expenses, such as weddings, medical emergencies, travel, education home renovations etc.

Comparison: credit cards vs personal loans

While both credit cards and personal loans provide quick access to funds, each has a few distinct advantages over the other. Here is a comparative overview:

• Interest rates: Credit cards generally have higher interest rates than personal loans, making them more expensive for long-term borrowing.
• Repayment structure: Credit cards have a revolving credit line, while personal loans have a fixed repayment structure, making personal loans more predictable.
• Access to funds: Credit cards offer instant access to funds, while personal loans require a one-time application and approval process.
• Usage: Credit cards are ideal for daily expenses and short-term borrowing, while personal loans are suitable for large, one-time expenses.

Deciding between a credit card and a personal loan will largely depend on your financial need, repayment capacity, and the urgency of funds. Here are some scenarios to guide your decision:

Case study 1: wedding

Take the case of Rohit and Alisha, a soon-to-be-married couple in Delhi. They are planning a traditional Indian wedding. To fund this event, they are considering two options: getting a credit card with a high credit limit or taking out a personal loan.

A credit card could provide them with instant access to funds. However, they know that this is going to be a massive amount of spending and will require time to repay. Thus, a personal loan seems like a more structured solution.

With a fixed EMI and a comparatively lower interest rate, they would know exactly how much money they have to repay every month.

Given the scale of their expenses and their ability to plan repayments, Rohit and Alisha plan to apply for a personal loan to fund their wedding.

Case study 2: start-up saga

Meet Meera, a promising entrepreneur planning to kick start her own IT firm. She needs to buy laptops, servers and other equipment but is short on funds. Her choices, like Rohit and Alisha, boil down to a credit card and a personal loan.

However, Meera’s circumstances are different. She is expecting to close a big contract in a few months and requires a temporary financial buffer. For Meera, a credit card becomes a viable solution.

The immediate availability of funds, the rewards on purchases, and the ability to pay back within the grace period without any interest are decisive factors. Thus, Meera plans to apply for a credit card to fund her start-up expenses.

These case studies highlight how both credit cards and personal loans can serve different needs based on the financial situation, repayment capacity, and urgency of funds.

Wrapping Up

No financial product is better than the other – it just depends on what you need the funds for. Remember, your personal finance decisions should be rooted in your needs and financial health.

IndusInd Bank offers a broad range of instant credit cards and personal loans to cater to your different financial needs. With its 100% digital process, getting access to these financial products is extremely convenient.

Whether you need a financial product for daily expenses, a big-ticket purchase or a financial emergency, consider the options available to you carefully. It’s always wise to assess your financial needs, explore the options available and select the one that suits your circumstances the best.

Apply now for IndusInd Bank Credit Cards and Personal Loans. The journey to sound financial management is just a click away.

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.