Personal Loan Vs Credit Card – When should you opt for it?


Whenever a sudden expense or immediate need strikes, availing of a personal loan or paying via a credit card are often sought-after options. However, it is essential to understand the ideal scenarios in which you can use either of the two methods.

Let us understand both these products independently first –

What is a Personal Loan?

A personal Loan is an advance offered as a lump sum without pledging any collateral from the borrower. Interest is charged on the amount borrowed, and then it is expected to be repaid within a defined period. Usually, there are no restrictions on the end use of the amount borrowed through a Personal Loan. Hence, you can use it for a wide range of purposes – Education, Travel, Weddings, Medical expenses, Renovation, etc. You may need a good credit score (generally 750 & above) to avail of a Personal Loan. Multiple instant Personal Loan apps available online can help you get quick financial assistance. They are Early Salary, Bajaj Finserv Personal Loan app, Tata Capital, Kissht, etc. Each platform can have its own set of criteria, which you may have to fulfill to be deemed eligible for availing of an instant Personal Loan online.

What is a Credit Card?

Credit cards’ history can be traced back to the 1920s in the United States, when they were first used. Since then, this instrument has gained popularity rapidly among the masses. A Credit Card is an instrument that allows its owner to pay for goods or services in advance, up to a specific limit, and then repay it with interest later. Generally, it possesses the attribute of Revolving Credit, wherein the Credit Limit is revised upon complete repayment of past debts. There is no fixed time frame to pay back the amount used through the Credit Card. The more time any cardholder takes to repay, the more interest he is charged. There are numerous options where you can apply for a credit card online. RBL MyCard, Bajaj Finserv, and CredPal are some of the popular Credit Card apps, or you can also apply on any Bank application. You can easily avail online credit card and monitor your transaction through the app.

When can you use a Credit Card or a Personal Loan?

Not every situation can be ideal either for a credit card or for a personal loan. Under certain circumstances, a card would make an apt choice & likewise, a person would be an appropriate option for certain instances. The below table highlights some ideal scenarios in which you can choose to use either a Credit Card or a Personal Loan –

Credit Card

Personal Loan

For buying something within your credit limit

For paying back entities that do not accept credit cards

For making any instore/online purchase

Paying a large amount over some time

If you are not eligible for a Personal Loan

If you need an amount large than your credit limit


So, what is better?

Once you know your spending and repayment habits, you may know the answer to this question. Although, here’s a quick comparison to help you choose better –

Personal Loan

Credit Card

Amount once borrowed cannot be revised

The credit limit can be revised after successful repayment

Lower interest rates

Slightly higher rates than Personal Loan

Fixed time period for repayment

Higher interest rates & penalties if repayment is delayed

No collateral needed

There are Secured Credit Cards that need a cash deposit as a security.

CIBIL score needs to be strong

CIBIL score needs to be strong

Offered as a Lump sum

A credit limit may not be increased in case of bad CIBIL

No restriction on end use

No restriction on end use


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sanchita bhardwaj
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