4 Situations When To Prefer A Personal Loan Over Credit Card

  Author: Sanjay Sharma

Credit cards provide you with great convenience of a loan at hand so that your daily life doesn’t get disturbed due to immediate cash requirements. But there are many times when you have an urgent financial requirement and need to opt for a personal loan instead of using the credit card. Here are four such situations when opting for a personal loan makes sense.

When expected repayment period is long For a higher loan amount you need time to repay. In such circumstances, a credit card would typically be unable to provide you with such a loan. There are also credit cards which do not offer longer tenures for EMI options. In such situations, a personal loan with an affordable EMI is your best bet.

EMI option unavailable with credit card When you have a credit card that does not offer the EMI facility for the use you intend to make, personal loan becomes the default option, with the absence of any other lower cost loan option. If your intended use requires cash and your credit card does not offer a cash loan on EMI, go for a personal loan.

Insufficient credit card limit for EMI option When the amount of money required by you is much greater than the available credit card limit, you need to seek a personal loan.

High credit card EMI interest rate The cost of the credit card EMI option is important when you are comparing personal loan and credit card EMI. If the interest rate charged for the credit card EMI for desired loan tenure is much higher than that of personal loans, opt for the latter.

Zero or lower prepayment charges If interest rate and processing fees are similar for both credit card EMI and personal loan but the personal loan provider offers you flexibility of prepayment without any penalty, opt for the personal loan. This will help you contain the overall interest cost of the loan.

Clearly, in the above situations, it makes better financial sense to go for a personal loan over a credit card EMI. What is more suitable to you will depend on the variety of factors specific to you. You need to take them into account while taking a decision.