Why is Personal Loan Better than Credit Card Loan to Finance a Purchase or Project?

Posted on Saturday, June 26th, 2021 | By IndusInd Bank

It’s the sales season, all the cards are aligned in your favour, and your Mercury is finally out of retrograde; because the Smith machine you had been waiting to add to your home gym is launching last. Now, instead of exhausting your savings, you decide it’s better to go take a personal loan to finance your big-ticket purchase. This leaves you puzzled over the two options: using your credit card or availing personal loans.

Well, no matter what your big-ticket expense is, a personal loan will almost always fare better between the two. Let’s explore why.

Difference Between Personal Loans and Credit Card Loans

Personal loans are unsecured loans taken to meet various personal needs, ranging from debt consolidation to home renovation projects, and provided as a lump sum amount. In contrast, credit cards are classified as revolving credit, which allow you to borrow money up to a prespecified limit and pay it back monthly.

Both the financial products are deliberately designed to serve a gamut of personal needs the customer may have. Having said that, it’s also equally important to highlight how the two differ.

When you take a personal loan, you’re obliged to repay the borrowed sum over a predefined tenure, so you have a clear overview of your debt. Credit cards, in contrast, have a monthly billing cycle, where all your monthly transactions are added to your credit card bill, including other charges. As a result, your debt varies from month to month.

Benefits of Personal Loans Over Credit Card Loans

If you’re looking to buy a high-end item, it makes more sense to go for a personal loan. Not only does it allow you to make bigger purchases but also repay the loan amount over a longer period comfortably.

Here are three other reasons why personal loans are undeniably the better credit instrument for big-ticket funding.

• Affordable Interest Rates

While credit card loans are undoubtedly convenient methods to overcome a cash shortage, nine out of ten times, they are usually accompanied by higher rates of interest, often between 10-18%. Personal loan interest rates, on the contrary, are relatively affordable and don’t take a toll on your financial health.

Personal loan interest rates are also negotiable in most cases. If you boast of a high credit score (700 or above), you may even get a competitive rate on your loan. The same is not the case with credit cards.

• Limited Spending

With a credit card in your hand, there’s always a chance you may end up relying on it for day-to-day purchases, whether big or small. It may even affect your spending habit, leading to overborrowing of credit. But since you only get a one-time lump sum amount when you take a personal loan, you’re more careful about how and what you spend it on. This keeps you in check and from going on a spending spree!

• Instils Discipline

Sure, there’s a greater measure of flexibility with credit cards, given how you can access funds 24×7 and almost instantly. But in the end, they also leave a bigger window for losses and bad debts. In contrast, the personal loan EMI obligations make you financially responsible and foster a habit of savings.

Now, when it comes to quick and easy personal loans, IndusInd Bank undoubtedly tops the list. So why look anywhere else? Get an instant loan of up to Rs. 15 lakhs and finance your premium purchases conveniently.

We’ll consider your eligibility, repayment capacity, monthly income, and nature of your job to check your creditworthiness. Once you qualify, we only take 4-7 working days to disburse the loan amount. Sounds like a deal you’d want? Then, wait no more and apply for a personal loan here.

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.