As consumers, ideally, we want to be able to fulfill all our wants with our salary whilst preserving a rainy day backup. But in reality, most of us have little option but to borrow to bridge the gap. As financial institutions carpet bomb you with loan offers, mailers, and SMS, it is important to differentiate between each instrument. While deciding to take credit is one decision, choosing between an instant loan and a credit card loan is another. Both give you the option to structure credit and its terms, but there are differences.
A credit card loan is generally recommended for short-term debt and instant cash loans when you need a longer repayment tenure to pay back the debt. Having said that, there’s more to it.
Credit Card Loan: Generally, the credit card loan limit varies between two to three times your monthly salary. If you earn Rs 25,000 per month, your credit card loan limit will vary between Rs 50,000 and Rs 75,000.
For instant loans, there is no fixed limit as there are several other determinants that decide the loan amount. You can get a bigger loan amount sanctioned and the ticket size generally varies between Rs 1 lakh to Rs 15,00,000. The most commonly evaluated determinants are your debt-to-income ratio, job stability, credit score, etc. The higher your income is, the better chances you have at getting loan approval.
Looking to finance a bigger expense? Consider the Fibe instant loan. The minimum salary requirement that makes you eligible for personal loans in rural areas is INR 15,000 and if you reside in a metro city, it is INR 20,000 per month.
Need credit but don’t have collateral? Worry not, you can take an instant personal loan or credit card loan. Both are unsecured and there is no collateral or security. However, be mindful of the loan agreement and the fine print before opting for either of these. Understand the case of non-repayment & delayed payments as they are a tad different from traditional loans.
A credit card loan works only with vendors who accept card payments. This may limit the use case unless you get hard cash against it (which comes at a higher interest rate fee).
On the contrary, a cash loan does not have a caveat on spending. You can use it anywhere as the disbursed amount is transferred directly to your bank account. This is helpful for large ticket-size loan requirements like significant home repairs, exotic holidays, etc.
A credit card loan is associated with revolving debt where repayment is open-ended and tied to an interest rate charge that varies with the monthly dues. Consider, for example, a credit card with Rs 50,000 spending limit and you have dues amounting to Rs 40,000 (on the verge of being maxed out). In this case, your monthly interest rate will be higher, and it’ll fluctuate until you have settled dues.
These types of loans are associated with installment debt where you have to pay fixed installments every month. Here, the interest rates are fixed irrespective of the sanctioned amount used.
A credit card is better suited for small purchases and its repayment tenure ranges from 30 days to 45 days. Non-repayment or delayed payments attract high-interest rates on the outstanding amount.
The tenure to repay the loan amount varies from 3 months to 24 months. If you need to borrow against a longer time frame, it is best to choose an instant cash loan.
If it’s a smaller sum, choose a credit card as it is faster to pay off and if you have excellent credit, you may even get a lower rate or may qualify for a 0% introductory APR on a new credit card. However, if you are a spendthrift, a cash loan can keep you out of the vicious cycle of debt. It’s also better if you need a substantial credit amount.
Clearly, there’s no one-size-fits-all with respect to cash loans or credit card loans. If you need a loan, the instant loan app can help. The process is simple and quick. All you have to do is download the Fibe app and register to apply!
Download the personal loan app here, or log in to our website and be a part of the #OneSmallStep experience.
While both options are common to most people’s financial toolkits, you can choose between them based on the amount you require and your repayment timeline. Take a loan for a larger loan amount and a longer tenure and a credit card for a small amount and a shorter tenure.
Take a call based on your need for finance. Both options help you get access to funds and build your credit score if you can repay what you borrow or use on time.
Usually, credit cards come with a higher interest rate as compared to personal loans. However, you only pay interest on credit cards if you do not clear your dues on time.
A quick loan gives you a higher loan amount and comes with a flexible repayment duration that you can choose based on your finances. A credit card gives you 30-45 days to clear your past dues and offers you revolving credit, attractive offers and deals.
A credit card can be more affordable as you can avoid interest charges as long as you can pay your bill in full. If you cannot, then a credit card generally has a higher interest rate as compared to a loan.
A personal loan requires you to meet the lender’s eligibility criteria, fill in an online application form, submit the required documents and then repay the loan amount in EMIs over a time of your choosing. Applying for a credit card may involve the same procedure or be easier if you are an existing customer or receive an offer. However, the interest rate is higher on any pending dues in comparison to a loan.
Consider both options and compare their features based on the amount you can borrow, restrictions on use, repayment timeline, and eligibility.