Personal Loan or Credit Card Which one would you go for

There could be times when you are dealing with emergency expenses, and you need to choose between a personal loan and credit card to tackle the same. Thanks to a broad range of financial services available today, you can avail both.  Subject to terms and conditions, you can access them without much hassle if you have a good credit score. Both options come with certain pros and cons, however.

Here are a few points to consider before you decide between the two in your case.

Spender’s delight
If you are a shopaholic or an impulse buyer, using a credit card can spur your extravagance. The card allows you to acquire things even if you lack sufficient cash. However, remember that no lunch is free. You must repay the card bill at the end of the billing cycle, and you need to have a sufficient bank balance to afford that. A failed or missed card payment attracts exuberantly high penalty, and this would add to your financial woes. Such an action would deteriorate your credit score and bar chances of being granted loans in future.

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A ‘friend’ in need
In emergencies or for making instant payments, the credit card can be a lucrative option. Hospitalisation and associated medical expenses are skyrocketing during the current COVID scenario. You may need to make payments upfront at the hospital front desk before the treatment can begin. You may not have sufficient funds to pay right away. The approval of a personal loan application takes time. You are advised to pay hospitalisation bills via credit card since it is an excellent option during such trying times. You can also avail a loan on yourcard, which usually has a higher interest rate vis a vis personal loan. This is because credit card loans posea greater financial risk to financial institutions. Higher interest rates guard financial institutions against the borrowers’ default risk.

Savings matter
As compared to credit card, you can save more with a personal loan because its interest rates are remarkably lower. In the case of the former, the interest rates can be as high as 19% per month. Besides, personal loan interest rates are negotiable while credit card rates are not. If you have dire need of emergency funds that do not require immediate payment, go for a personal loan since they get easily approved nowadays. Online loan applications expedite the verification process, thus facilitating speedy disbursal. Most financial institutions offer online application facility. Check your eligibility and choose the best rate on your plate.

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Rewards‘n’ offers
If you love earning reward points and redeeming the same to avail discounts, vouchers, and gift hampers, the credit card is a good option for you. Even if you travel less nowadays amidst the COVID scenario and cannot avail reward points on fuel refills, you can earn numerous reward points via online shopping. Better still, these reward points can be redeemed and adjusted against your credit card bills. Acard is an excellent option if you are purchasinga big time. Purchasing items like furniture, jewellery, and electronic gadgets can help you avail lucrative opportunities like EMI, insurance coverage (for the item), and an extended warranty.

Stability is the key
A personal loan comes with fixed interest rates, fixed EMI, and pre-decided payment tenure. Such features make it a more reliable choice over other modes of credit, especially at these turbulent times. Fixed EMIs help you plan repayments better and save more. They also help you adhere to the budget and empower you with better financial stability.

           ALSO READ: Availing Personal Loans Just Became Super Easy with Digital Lending

Guard against foul play
Credit card is highly susceptible to financial frauds. If you are using one, never share details like PIN, CVV number, and expiry date over the phone with anyone. No financial institution will ever ask for such confidential information. Avoid saving such details on your computer, laptop, or smartphone. You are also advised not to use thismode for making online payments at public places like cyber cafes.

The above tips would help you make a wise choice between the credit card and personal loan. Not to say, specific circumstances may also influence your choice and prompt you accordingly. You need to decide prudently and select the option that suits you better at the spur of the moment.