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    What is your plan of action when you are in need of some cash or credit and you do not have sufficient funds? You may either opt to swipe your credit card or go with the traditional way of taking a loan. You have two options, either take a loan on your credit card or take a personal loan. To make a choice between the two, you will have to draw a comparison based on our needs and situation.

    Personal Loan:

    Personal loan is usually an unsecured loan taken for various purposes ranging from medical reasons, to expensive purchases to a vacation or even debt consolidation. The interest charged on personal loans is high as they are unsecured loans.

    Credit Card Loan:

    Loan on credit card is a pre-approved loan that does not require any documentation. It is the fastest source to attain unsecured credit. In this type of loan, a certain part of your credit card limit that is unutilized is offered as a loan. Loan on credit card is not same as cash withdrawal.

    Credit Card Vs Personal Loan

    Personal loan and loan on credit card seem similar but are not exactly the same.

    • Documentation: A personal loan requires quite a number of documents for approval and takes a few days to come through, however loan on credit card does not need any documentation and is faster to attain.
    • Interest: This is the most important point to be considered while taking a loan. Usually, person loans are offered at a 13-22% interest rate, while credit card loans offer interest rate of 10-18%. However, another key factor is that credit card loans can be availed at flat interest rates, while personal loans are available with reducing balance rates.

    Monthly interest in case of flat rate loans is applied on the initial loan amount and it remains the same for the entire duration of the tenure, even though the principal amount decreases. While in case of reducing balance loan, the interest outflow decreases as and when the principal is paid.

    • To avail a personal loan, you do not have to be the bank’s customer, however to avail a loan on your credit card, you must be owning the bank’s credit card.
    • Unsecured Loan: However, both these loans are unsecured and there is no collateral involved.
    • Tenure: Credit card loans can be taken for lower tenure periods, while personal loans are usually long duration loans.
    • Loan Amount: A credit card loan is a suitable option when in need of a small amount of loan, while with personal loans, you can avail a huge loan.

    After comparing both loans, you can make a choice based on your financial need, time frame for which you need the loan and how soon you need it. If you are clear about your requirement, it is easier for you to make the right choice.

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