Indialends, 10 Jun 2025

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Personal Loan vs Credit Card : Which One Should You Choose?

What’s Inside This Blog?

What is LAMF Finance Charges (Interest Rates) Late Payment Fees Cash Advance Fees

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

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?

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?

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?