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When you need urgent funds, two popular options are personal loans and credit card loans (cash advance or EMI conversion). Both can help during financial emergencies, but the big question is: Which one is cheaper and better for you?
Let’s break it down.
📌 What is a Personal Loan?
A personal loan is an unsecured loan offered by banks and NBFCs.
No collateral required
Fixed tenure (1–5 years)
Fixed monthly EMIs
Interest rates: 10% – 18% p.a. (varies by credit score and bank)
✅ Best for: Planned expenses like weddings, medical bills, education, or debt consolidation.
📌 What is a Credit Card Loan?
A credit card loan can be of two types:
Cash Advance – Withdrawing cash using your credit card.
Very high interest: 30% – 45% p.a.
Additional ATM withdrawal fee
No interest-free period
Credit Card Loan on EMI – Converting purchases into EMIs.
Interest rates: 18% – 24% p.a.
Shorter tenures (6–36 months)
✅ Best for: Short-term emergencies or when you can repay quickly.
📊 Personal Loan vs. Credit Card Loan: Quick Comparison
| Feature | Personal Loan | Credit Card Loan |
|---|---|---|
| Interest Rate | 10% – 18% p.a. | 18% – 45% p.a. |
| Tenure | 1 – 5 years | 6 – 36 months (EMI), Immediate (Cash Advance) |
| Loan Amount | Up to ₹25 Lakhs | Limited to credit card limit |
| Processing Fees | 1% – 3% of loan amount | 2% – 3% of withdrawal/EMI |
| Repayment | Fixed EMIs | Monthly card bill/EMI |
| Best For | Planned expenses, big needs | Urgent short-term needs |
✅ Which is Cheaper?
Personal Loan: Much cheaper in terms of interest. Better for larger amounts and longer repayment.
Credit Card Loan: Expensive due to high interest, but convenient for small, urgent needs if repaid quickly.
👉 If you need funds for more than 6 months, personal loans are usually cheaper.
👉 If you can repay within 1–2 billing cycles, a credit card loan works fine.
💡 Tips to Save Money on Loans
Always compare interest rates across banks.
Use a personal loan EMI calculator before applying.
Avoid cash advances on credit cards unless it’s a last resort.
Maintain a good credit score (750+) for better loan offers.
❓ FAQs
1. Is personal loan interest lower than credit card loan?
Yes, personal loans are usually cheaper (10–18% vs. 30–45%).
2. Can I convert a credit card loan to EMI?
Yes, most banks allow it at 18–24% interest.
3. Which is better for emergencies?
Credit card loan is quicker, but personal loan is more affordable.
4. Can I prepay my personal loan?
Yes, but some banks charge prepayment fees.
5. Do credit card loans affect my credit score?
Yes, high utilization and delayed payments can lower your CIBIL score.
Published on : 28th August
Published by : SMITA
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