24 May, 2025 | 11:01 IST
Emergencies can hit when you least expect them, whether they be a medical issue, home repairs, school fees, or even last-minute travel plans. And when you need quick cash, it can be tough to decide how to get it.
Credit cards and personal loans are two popular go-to options in such cases. Both offer fast access to funds, but they differ in aspects like eligibility, interest rates, and repayment terms.
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A personal loan is a lump sum amount given to the borrower with a fixed interest rate and a set repayment term. This is an unsecured loan that doesn't require any collateral or security in order to get funds.
A credit card is a short-term loan where you spend within a set limit and repay monthly, either in full or in parts. Interest is charged on the remaining amount you owe.
Here are the key differences between personal loan and credit card:
| Features | Personal Loans | Credit Card |
| Loan amount | Suitable for larger amounts | Suitable for smaller amounts |
| Interest rate | Lower | Higher (applicable only when not paid back fully on time) |
| Repayment tenure | 1 to 5 years | Need to be paid monthly- preferably in full |
| Approval process | Disbursal may take 2-3 days | Approval not applicable. Amount can be spent up to offered credit limit |
| Documentation process | More detailed, required identity, address, employment and income proof. Online apps may make the process smoother. | Minimal to no documentation |
Get instant access to personal loans up to Rs 50 lakhs through Moneycontrol's collaboration with eight reliable lending partners. The entire process is 100% digital. Pick an EMI plan, fill in your details, and complete a quick online KYC. With interest rates starting at 10.50%, borrowing has never been this simple.
Despite the high interest rate and inflexible repayment tenure, some people prefer credit cards over personal loans. Here's why:
1. Instant funds received
With a credit card, funds are accessible immediately. No separate approval required once you receive a credit card with a given credit limit. This is unlike personal loans, which may take 2-3 days for disbursement.
2. No interest rate grace period
Sometimes, you might miss a payment due date. For personal loans, interest is charged daily on the outstanding amount after the due date.
Credit cards offer an interest-free grace period, typically between 20 to 50 days. During this period, no interest is charged if you pay off the full balance. Interest rates are applicable on the outstanding balance if you do not pay the bill in full.
3. Rewards and cashback
Credit cards also give you rewards for spending. These rewards can be in the form of reward points, cashback, airport lounge access, fuel surcharge waivers, OTT subscriptions, free movie tickets, discounts and offers. The reward points can also be used to book flights and hotels.
Credit cards offer many benefits, especially in emergencies like last-minute travel or medical needs. That said, they may not be the best choice for large expenses.
One reason is the credit limit, which restricts how much you can borrow. Credit cards also usually have higher interest rates compared to personal loans, making them more expensive in the long run.
Credit cards work best when you need funds for a short period, usually for around 30 to 45 days. You should use a credit card only if you are confident about repaying the amount quickly. Small amounts can be repaid quicker, but larger dues may take time to clear, and interest will keep on adding, potentially putting a strain on your finances.
These cards are also a good choice when you want extra perks, like rewards, cashback, discounts, and offers on the amount spent.
Moneycontrol has partnered with eight trusted lenders to offer fully digital personal loans of up to Rs 50 lakhs with minimal paperwork. To apply, choose an EMI plan that suits you, enter your personal details, and complete the online KYC process. Enjoy competitive interest rates starting at 10.50%.
Credit cards and personal loans are both viable forms of borrowing, but which one is best for you will rely on your financial state, the urgency of your needs, and your ability to repay.
Using a credit card or choosing a credit card loan can be beneficial if you have a clear repayment plan and need immediate cash for a brief period of time. A personal loan is typically a better option if you need a larger amount, prefer lower interest rates, and want more scheduled repayments.
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