Personal loans and credit card loans both have their own perks. Some people prefer to take personal loans. Whereas some prefer to acquire loans using a credit card. Everybody has his/her preferences, but one should know all the details about personal loans vs credit card loans types before getting loans.
Every bank offers different types of personal loans, but most are car loans, home loans, and education loans. Personal loans include unsecured and secured loans which we will discuss later. Banks have set a certain interest rate on the monthly payments of the debt. However, a credit card has a different interest rate as compared to personal loans. Also, both have advantages and disadvantages as well.
Here we will tell you all the things you need to know about these types of loans including their pros and cons.
First, we will tell you about personal loans. In personal loans, the bank gives all the amount in just a single payment. It means the borrower does not have to wait to get the loan amount and money will be transferred at once in the account. There are two types of this loan: One is an unsecured personal loan and the other is a secured loan. Similar to personal loans, a credit card also has secured and unsecured loans.
To apply for a personal loan, the applicant will pledge personal property. This property is a security for the bank which will lend you the money. If someone does not own a property, then it will be difficult for loan providers to give the mortgage. A qualified borrower can get more than $100,000 of personal loan.
- Personal loans can be used to make big purchases like buying a home, a car, or a property.
- Borrowers get a loan in a single payment. They do not have to wait to receive funds in installments.
- If we compare to credit cards, personal loans have lower interest rates.
- A personal loan can be taken in a medical emergency that has a high amount of bills. So, a personal loan is good in sudden medical treatments.
It will be unfair if we only tell you the advantages of personal loans. Some of the cons are
- Huge fees are imposed on the time of receiving the loan and it will add to the total amount which has to be returned.
- The time period is too short sometimes.
- Bank will take over your security property, a home, or a car if you would not pay back the loan in the given time.
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Credit card loans
Other than personal loans, a credit card is also used to get loans. In this type, a person who wants a loan will apply for a credit card. After the issuance of a credit card, the bank will lend money. Using a credit card, you can get a loan at any time as per your need.
A lender will decide to give credit or not on the basis of credit score. This is a number that shows the eligibility of an account holder who is demanding credit card loans. Credit score depends on many factors like previous loan payment history, number of accounts, and total owed amount.
A score of 800-850 is an excellent credit score that will make the lender provide you credit loan in the future. However, a credit score of 300-580 is poor and makes you ineligible for credit.
- It is more convenient to use a credit card.
- You can increase your daily transaction limit on the credit card to a maximum limit.
- Credit cards come with offers. So, a borrower gets rewards on use like discounts and cash backs at different brands and stores.
- Interest will only be applicable if funds are used, otherwise, 0% interest rate.
So, we will also tell you about the cons of credit card loans
- High-interest rates when compared to personal loans.
- If you are unable to pay the loan, it will be like a mousetrap. You will not be able to pay the debt because the interest rate will increase continuously.
- Different fees can add up in the total amount of credit loan.
Personal loans vs Credit card loans: Which to choose?
Choosing between personal loans or credit card loans is a difficult step. Both have different working phenomena. But you must be careful and choose any of them wisely. A personal loan gives you a desired large amount of money in one go, but it has high-interest rates. However, a credit card gives you a lesser interest rate, but you can not take a large number of funds at one time. Also, it depends on the amount of loan you want. So, this decision is sometimes hard to take and solely make after the complete analysis of financial conditions.