Sandipan Mitra is the CEO and co-founder of Pice. He boasts eight years of experience in the B2B and fintech sector. Sandipan's journey includes significant roles at multiple Indian Unicorns Including Product at PayU, and as founding member / VP, Product at Open Financial Technologies.
22 Oct 25
6 mins
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Personal Loan vs Credit Card Loan: Key Differences Explained
Personal loan vs credit card loan are viable options to meet expenses but they have their differences.
A personal loan is ideal for planned, long-term expenses, while a credit card loan suits urgent, short-term financial needs.
Interest on personal loans is generally lower compared to credit card loans, making them more cost-effective for larger borrowing.
Personal loans offer higher loan amounts and longer tenures (up to 6 years), whereas credit card loans are smaller and short-term.
Credit card loans are pre-approved and disbursed faster, while personal loans require more documentation and approval time.
Using either option responsibly can boost your credit score, but overusing credit card loans can increase your credit utilization ratio.
If you need funds urgently, there are two convenient options to choose from, namely, personal loan vs credit card loans. About 77% of working professionals in India rely on personal loans to make ends meet. This suggests that borrowing money has become a new normal for many individuals.
Due to rising living costs, limited savings, and unexpected expenses, many people find themselves opting for loans to bridge the gap in their living expenses. While the two options are great, personal loan vs credit cards have their share of differences.
Comparison of Personal Loan vs Credit Card Loans
Basis of Difference
Personal Loan
Credit Card Loan
Definition
They are unsecured loans which do not need any collateral or security
They refer to loans availed against any active credit card
Loan Amount
Higher loan amounts are available as per creditworthiness
Can be within or beyond the credit limit
Suitable ForÂ
Long-term planned needs
Short-term and urgent needs
Interest Calculation
It is calculated on the total disbursed loan amount
It is calculated on the availed loan amount
Eligibility
Requires a stable income and a good credit score
Requires an active credit card with good credit history
Approval Time
Takes more time (3 - 5 business days)
Quick approval within 24 hours
Interest Rates
Comparatively lower than credit card loans
Much higher than personal loans
Repayment of Loan Tenure
Longer tenure ranging from 1 - 6 years
Shorter tenure generally 3 - 36 months
Documentation
Requires identity proof, income proof and address proof
Does not require any additional documents
Credit Impact
Affects the credit score but increases the diversification of credit
Affects the credit utilisation ratio
Now that you have an understanding of personal loans vs credit cards, let us delve into the details of how each type of loan helps.
Benefits of Getting a Personal Loan
No Collateral Against Loan
Personal loans are a type of unsecured loan. It means that you do not have to mortgage any collateral, such as shares or a home, to avail the loan.
No Limitations on Usage
One of the benefits of availing oneself of personal loans from a financial institution is that there are no restrictions on the usage of the funds. You can use them for any purpose, such as business investments, home renovations, trips, etc.
Hassle-Free Processing of Loans
You can apply for a personal loan online via mediums such as Net Banking, website, or ATM. Personal loans can be taken by visiting the nearest bank branch. The application process is quick and efficient.
Repayment Through EMIs
Personal loans generally come with a defined repayment structure. By selecting either a long or short tenure, you can determine the monthly payment amount.
Access to Larger Sums
Personal loans generally offer larger amounts of money than what family and friends may be able to lend. This is majorly beneficial for significant expenses.
Credit card loans are unsecured and collateral-free. Hence, you do not have to go through the hassle of providing a guarantor.
Pre-Approved and Hassle-Free to Avail
All sorts of credit card loans are pre-approved and also unsecured. Hence, you do not need to submit any collateral or documents to avail of these loans.
Potential for Rewards
Credit card loans offer the option of earning reward points, cash back deals, and other rewards, compared to other types of loans. This is a significant advantage when comparing a personal loan vs credit card.
Flexible and Quick
These loans are instantly disbursed. There is also no waiting time in instances of purchasing conventional loan products. Furthermore, a bank can offer you the option of converting purchases into EMIs after you have made the purchase.
Helps to Build Credit Score
Each time you transact with a credit card, you get the opportunity to increase your credit score. Making timely repayments increases your credit score. It can help you avail affordable finance in the future.
💡Pay your credit card bills with the PICE App and improve your credit score.
How to Decide Between a Personal Loan vs Credit Card Loan
Knowing when to borrow with a personal loan vs credit card loan can help you make better borrowing choices. A personal loan is suitable for well-planned, larger purchases, such as home improvements, higher education, or paying off multiple loans. It has greater amounts of loans, geared EMIs, and relatively lower interest rates, thus ideal for long-term payment commitments.
Conversely, a credit card loan is most suited for immediate or small, short-term requirements. It is ideal for covering emergency medical expenses, last-minute vacations, or unexpected purchases due to its rapid disbursement and minimal documentation requirements. Credit card loans also have cashback or reward offers in some cases.
Selecting the most appropriate type of loan according to your circumstances leads to more effective cost control, timely payments, and a better credit score in the long term.
Conclusion
Credit card loans are more suited for urgent expenses, whereas personal loans are more beneficial for getting higher loan amounts. When making a decision between a personal loan vs credit card loan, make sure to consider each of their unique advantages before coming to a final decision.
FAQs
What is the main difference between a personal loan and a credit card loan?
A personal loan offers a fixed lump sum for long-term use, while a credit card loan provides instant funds against your existing card limit.
Which is cheaper in terms of interest rates: personal loan vs credit card?
A personal loan usually has lower interest rates than a credit card loan.
Which one gets approved faster: personal loan or credit card loan?
Credit card loans are pre-approved and can be disbursed within 24 hours, unlike personal loans which take a few days.
Can I get a credit card loan without a good credit score?
You need an active credit card with a good repayment history, even if your overall credit score isn’t very high.
Which should I choose if I want flexible repayments?
Personal loans provide more structured EMIs over longer tenures, offering better repayment flexibility.
Sandipan Mitra is the CEO and co-founder of Pice. He boasts eight years of experience in the B2B and fintech sector. Sandipan's journey includes significant roles at multiple Indian Unicorns Including Product at PayU, and as founding member / VP, Product at Open Financial Technologies.
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