When we are in need of money; we tend to look out for the sources that would process our loans in the quickest possible time frame. However, it isn’t only about the quickest processing, there are a number of other factors usually considered while borrowing money. These include, rate of interest while repaying, the duration of repayment and the maximum amount borrowable and so on. Perhaps the two quickest forms of availing immediate funds would be either through a credit card or a personal loan, let us have a look at the various advantages & disadvantages associated with both.
|
Features |
Personal Loans |
Credit Cards |
|
Maximum Borrowable amount |
1 lakh – 25 lakhs |
based on credit limit |
|
Eligibility criteria |
depends on income & previous credit history |
depends on credit limit |
|
Maximum repayment time |
1 year – 5 years |
Customer’s choice |
|
Interest free period |
nil |
till the date of the next billing cycle |
|
Approximate range of rate of interest |
13% p.a onwards |
36% p.a onwards |
|
Processing time |
about a week |
less than a day |
|
Prepayment charges |
1% – 5% (approx), may be waived at times |
nil |
Let us understand this further through an illustration. Let us assume we borrow 2 lakhs as a personal loan and also as a credit card.
Personal Loan
Loan amount: 2 lakhs
Tenure: 3 years
Rate of Interest: 15% per annum
EMI: 6933
Total amount you will end up paying: 2,49,590
Credit Card
Loan amount: 2 lakhs
Rate of Interest: 36% per annum
If you repay within the billing cycle, you will need to repay only the amount you borrowed,
i.e. 2 lakhs
Calculate your EMI: if you pay Rs.10,000
The tenure is decided depending on how much you choose to pay and till the point of time you complete your payments.
So, assuming you pay Rs.10,000 every month, you will end up paying a total of: Rs.309989
As you can see for yourself, there are clear advantages and disadvantages with each of the methods which is why you need to carefully choose which would you choose.
