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Credit Card Loans vs Personal Loans, which is better?

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Highlights

  • Credit Card Loans vs Personal Loans - Which helps you save more?
  • Know all that and decide the right pick for you!

Before giving you an exact answer to this burning question of credit card loans vs personal loans, we would tell you separately about both the credit card loans and personal loans.

Because you can not compare two things till you don’t have complete knowledge about it. So it is important to know about both of them first. And then, you can decide for yourself which is better. 

What are Credit Card Loans?

When we talk about credit card loans, first we would like to tell you how a credit card loan is different from a credit card. A credit card is used for your daily small or big purchases. You can use it anywhere whether at online or offline stores. When you make a transaction with your credit card, it gives you a time of 45 to 50 days to pay it back with two options – either Partially or Fully. 

If you make full payment on or before the due date, you won’t have to pay any interest. However, if you decide to pay the minimum due amount (which is generally 5% of the total outstanding balance), you may have to pay the interest rate of 2.5% to 4% per month, accumulating to around 30% to 45% per annum if you keep revolving this balance for a longer period. The interest rate will also apply to pay more than the minimum due but below the total due. This may leave you in a vicious debt trap. 

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How Does the Credit Card EMI Work?

Credit cards also give you the option of converting your big-ticket purchases into easy EMIs of 3 months to 24 months. For example, you bought a new smartphone worth ₹20,000 and you want to convert this transaction into EMI for 6 months. The interest rate generally ranges from 12%-14% per annum depending on your bank. Converting your big transaction once is not a big problem. But the real problem starts when you develop a habit of converting all your purchases into EMIs. In this way, you may end up paying EMIs for different transactions all the time. Think about all the interest amount that you would be paying. 

You can see the important details of some leading banks in the table below.

BanksTenureProcessing FeeInterest RateMinimum Transaction Amount
SBI6 to 24 months2% ( A minimum of ₹ 199 to ₹ 1,000) 22% Per Annum₹ 500
ICICI3 to 24 Months2% of the Transaction Value1.33% Per Month₹ 3,000
American Express 6 to 12 MonthsAs Applicable by the Bank1.33% Per Month₹ 5,000
HDFC 9 to 36 Months1% of the transaction Amount1.50% per MonthAs applicable by the Bank

Note: The time allowed to convert your big-ticket purchases into easy EMIs can differ from lender to lender. Generally, it ranges from 20 to 60 days from the date of the purchase.

What are Personal Loans?

You can say personal loans are similar to credit card loans when it’s about the purpose of these two credits. Like credit card loans, personal loans are also taken to finance your personal needs. But when it comes to interest, personal loans are quite different from credit card loans. In personal loans, you’ll have to pay the interest from the first day of the loan disbursement into your account. Though interest rates on personal loans are quite lower than credit card loans. It generally ranges from 10% to 24% per annum and also, you can repay it within a longer period of 1 year to a maximum of 5 years. 

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So, in the battle of credit card loans vs personal loans, you must have figured out the winner. Whatever option you choose, make sure it yields less cost and increased savings.

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Fullerton India14.00% - 33.00%
HDFC Bank10.75% - 21.45%
ICICI Bank10.75% - 18.49%
IndusInd Bank11.25%
Kotak Bank10.99% - 20.99%
RBL17.50% - 24.00%
Standard Chartered Bank11.00% - 15.00%
Tata Capital10.99% - 18.00%
Home Loan Interest Rates September 2020
Axis Bank7.75% - 8.55%
Bank of Baroda7.00% - 8.40%
Citibank8.20%
HDFC6.95% - 8.00%
ICICI Bank6.95% - 8.05%
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LIC Housing6.90% - 7.90%
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State Bank of India/SBI6.95% - 7.60%
Tata Capital9.20% - 9.35%