Blogs > Personal Loan vs Credit Card : Which One Should You Choose?
Personal Loan vs Credit Card : Which One Should You Choose?
Introduction: Personal Loan vs Credit Card – What’s Right
for You?
In today’s fast-paced digital world, when people need quick
access to money, be it for emergencies, shopping, travel, or debt consolidation,
the top two choices are personal loans and credit cards. But both
come with their pros, cons, and hidden charges. In this blog, we’ll break down
the key differences between a personal loan and a credit card using real
data, updated interest rates, and use cases so you can make an
informed decision in 2025.
What is a Personal Loan?
A personal loan is a fixed loan amount that you
borrow from a bank or NBFC and repay in EMIs over a fixed tenure. It's
unsecured, meaning you don’t need to provide any collateral. It's ideal for
large one-time expenses like weddings, home renovation, or medical emergencies.
Quick Facts:
- Loan
Amount: ₹10,000 to ₹40 lakhs
- Interest
Rate: 9% to 24% per annum
- Repayment
Tenure: 12 to 60 months
- Processing
Time: 24 hours to 7 days
What is a Credit Card?
A credit card is a revolving line of credit issued by
banks, allowing you to borrow up to a pre-approved limit. You can make
purchases or withdraw cash and repay later. If you repay the full amount within
the grace period (typically 45–50 days), you pay zero interest.
Quick Facts:
- Credit
Limit: ₹10,000 to ₹10 lakhs
- Interest
Rate: 30% to 45% per annum
- Grace
Period: Up to 50 days
- Minimum
Due: 5% of total bill
Personal Loan vs Credit Card – Key Differences
|
Feature |
Personal Loan |
Credit Card |
|
|
Interest Rate |
9% – 24% p.a. |
30% – 45% p.a. |
|
|
Tenure |
Fixed (12–60 months) |
Revolving (no fixed tenure) |
|
|
Loan Amount |
High (up to ₹40 lakhs) |
Low to moderate (₹10k–₹10 lakhs) |
|
|
Repayment |
Fixed EMIs |
Flexible, but costly if unpaid |
|
|
Approval Time |
1–3 days |
Instant to 7 days |
|
|
Use Case |
Big expenses |
Day-to-day purchases |
|
|
Collateral Required |
No |
No |
|
|
Best For |
Medical, wedding, renovation |
Shopping, travel, rewards |
|
When Should You Choose a Personal Loan?
- You
need a lump sum for a planned expense
- You
prefer fixed EMIs and structured repayment
- You
want to avoid revolving debt
- You're
consolidating high-interest debt (like credit card dues)
Tip: Use a personal loan to pay off high-interest
credit card bills. Many lenders like Navi, HDFC Bank, and MoneyTap offer instant loans
with interest rates starting at 10.5%.
When Should You Use a Credit Card?
- You
need short-term credit and can repay within 30–45 days
- You
want to earn rewards, cashback, or air miles
- You
have small, frequent expenses
- You
can manage your repayments without rolling over balances
Pro Tip: Use cards like SBI Cashback Card or HDFC
Millennia Card for up to 5% cashback on online spending.
Real-Life Example: Which Option is Better?
|
Scenario |
Ideal Option |
|
₹3 lakh for home renovation |
Personal Loan |
|
₹5,000 Swiggy order |
Credit Card (with cashback) |
|
₹1.5 lakh emergency surgery |
Personal Loan |
|
Booking flight tickets |
Credit Card (for travel rewards) |
|
Pay off ₹1 lakh credit card bill |
Take a low-interest personal loan |
Pros and Cons
Personal Loan – Pros:
- Lower
interest compared to credit cards
- Fixed
EMIs make budgeting easier
- Higher
loan amounts available
Personal Loan – Cons:
- Not
suitable for small-ticket purchases
- Pre-closure
charges may apply
Credit Card – Pros:
- Rewards,
cashback, and discounts
- Interest-free
period if paid on time
- Ideal
for everyday expenses
Credit Card – Cons:
- Very
high interest if dues are not cleared
- Easy
to fall into a debt trap
- Charges
like annual fee, over-limit fee, and late payment fees
Important Stats (2025)
- Over
52% of millennials prefer credit cards for short-term purchases
- The
average credit card interest rate in India is 39.99% per annum
- Top
personal loan lenders in India include Navi, HDFC Bank, Tata Capital, and
PaySense
Final Verdict: What Should You Choose?
|
If You Want To... |
Go For... |
|
Borrow ₹1 lakh+ for longer term |
Personal Loan |
|
Shop, pay utility bills, or travel |
Credit Card |
|
Repay credit card debt at low interest rates |
Personal Loan |
|
Enjoy rewards and deals |
Credit Card |
|
Avoid overspending |
Personal Loan (EMI-based control) |
Conclusion
Both personal loans and credit cards serve different
purposes. If you’re disciplined with money and pay dues on time, a credit card
can be rewarding. However, if you need a bigger amount with structured
repayments, personal loans are more affordable and reliable.
Choose wisely based on your financial needs and repayment
ability.
Frequently Asked Questions
Q. Which is cheaper: a credit card or a personal loan?
Personal loans are usually cheaper in the long run. Credit cards come with much
higher interest rates (30%+).
Q. Can I convert credit card dues into EMIs?
Yes, many banks allow EMI conversions, but the interest is still relatively
high. A personal loan might offer a lower rate.
Q. Which is better for emergencies?
For emergency expenses above ₹50,000, personal loans are better. For smaller,
short-term needs, credit cards can be useful if repaid on time.
Also Read:
- Best
Personal Loan Apps in India (2025)
- How
to Build Credit Score in Your 20s
- Credit
Card vs BNPL: What Should You Use in 2025?