Personal Loan vs Credit Card – Which Should You Take for Travel?

Slowly, but slowly, people have started travelling to their favourite destinations after putting such plans on hold for more than a year due to the COVID outbreak. As per Thomas Cook, a leading travel company, air travel had recovered 60% of its pre-COVID level in October 2021. With the third COVID wave receding fast, expect air traffic to grow even further. So, if you’re planning a vacation but don’t know which to choose – personal loan vs credit card – for the same, we make it easy for you. In this post, we’ll compare both these in terms of travel, thereby helping you figure out the better alternative for you. Let’s begin!

Personal Loan vs Credit Card for Travel

Before choosing between the two, get an idea of the travel expenses you’ll need to bear. Flight tickets, hotel accommodations, shopping expenses, and all other stuff that you want to do. After calculating all these, see which of the two – personal loan vs credit card – ensures you all for less. Besides these, check for the comfort and flexibility that you would need. Weigh these two financing options based on the factors mentioned above and pick one that scores more. Let us compare both this way.

Personal Loan vs Credit Card – Which Costs You Less for Travel?

While personal loans are available at an interest rate ranging from 10-25% per annum on average, credit cards come with an interest rate of 30-40% per annum. However, the interest will apply to credit cards only when you revolve the credit by not paying your dues or doing so partially. So, if you pay your entire credit card bills on or before the due date, no interest will accrue.

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Which of the Two Offers Greater Credit Limits for Travel?

While most banks offer a personal loan of up to 20 lakh, some can extend it to INR 40-50 lakh. The minimum personal loan can amount to INR 50,000. The loan amount is decided based on your income, credit score, etc. Healthy earnings give you more space for loan repayment, resulting in higher disbursals. And if your credit score from CIBIL and other bureaus is beyond 750, the possibility of higher disbursals is immense.

Whereas banks don’t specify on their websites the credit limits they extend to their credit card customers. Banks consider your income and credit score to assign you a credit limit. But here, the used credit limit for travel and other purposes will be added back the moment you pay your credit card bills. Suppose your credit card limit is INR 1,50,000, you use INR 60,000 and pay the same on the due date. The credit limit will reduce to INR 90,000 upon utilizing INR 60,000 and get back to INR 1,50,000 by paying INR 60,000.

Personal Loan vs Credit Card – Which Offers More Comfort & Flexibility?

Personal loan EMI payments can be made over tenures ranging from 12-60 months. Whereas you get an interest-free credit period of 45-60 days from the credit card issuance date. During this time, you can shop and pay the bill that arises on the due date. In case you can’t do it and also want to avoid tall interest charges of 30-40%, convert the dues into EMIs at a lower rate of 12-18% per annum. However, banks don’t convert all into EMIs. They usually allow EMI conversions for transactions made up to 45-60 days before the date of conversion.

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Do Rewards, Cashback & Other Features Turn the Equation in Favour of Credit Cards?

Reward and cashback offers differ based on the type of credit card you apply for. Since it’s about travelling, the focus should be on travel credit cards and their rewards & cashback offers. For instance, Citi Premiermiles Card helps you earn air miles on airline transactions that you can redeem at 100+ airlines and hotel partners. Besides, you get access to complimentary lounge access at some domestic airports across India. Such offers cannot be the case with a personal loan.

Conclusion

Both personal loans and credit cards help travellers in many ways as shown above. But if you’ve used the best credit card for expensive travel before and are reeling under the debt burden, you can switch the outstanding dues to a personal loan at a lower rate of interest. Cost-wise, a personal loan has a slight edge over a credit card. Even though the EMI option at a lower rate is available, you can’t have it for every credit card transaction you do. Also, credit card limits can’t be more than INR 2-3 lakh for low and mid-level range earners. Financially speaking, a personal loan comes as a better option. Credit cards outshine personal loans mostly on the privileges that travellers seek.

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Personal Loan Interest Rates October 2022
Fullerton India12.00% - 24.00%
HDFC Bank10.99% - 15.00%
ICICI Bank10.50% - 18.00%
IndusInd Bank10.49% - 31.50%
Kotak Bank10.75%
RBL17.50% - 26.00%
Standard Chartered Bank10.75% - 13.00%
Tata Capital10.75% - 18.00%
Home Loan Interest Rates October 2022
Axis Bank7.60% - 8.05%
Bank of Baroda7.45% - 8.80%
Citibank6.65% - 7.40%
HDFC8.10% - 9.10%
ICICI Bank7.10% - 8.85%
Indiabulls Housing Finance Limited8.65%
Kotak Bank7.99% - 8.60%
LIC Housing8.00% - 9.25%
Piramal Capital & Housing Finance10.50%
PNB Housing Finance8.00% - 10.70%
Reliance Home Finance8.75% - 14.00%
State Bank of India/SBI8.00% - 8.55%
Tata Capital7.75%