Unsecured Loans or Credit Card Loans: What to choose?

Are you in need of emergency cash to meet up your expenses? If you do not want any help from relatives or friends, you have to apply for a bank loan. Among the many kinds of loans, it is tough to find the right kind of loan that fits your need. You can avail a secured or unsecured loan, according to your requirements and repayment capacity.

People who are self-employed find it even more difficult to secure a loan. Lack of stable monthly income or no income proof causes it difficult to borrow at a great extent. Whether you want to make a big-ticket purchase or are worried about exhausting your savings, there is no need to worry if you want to avail a loan.

A Personal Loan or Cash Advance on your Credit Card, are the two swift methods of availing an emergency loan. You can easily avail the easy funds from most of the banks.

Unsecured loans or credit card loans?
Before you opt for a bank loan, it is important to evaluate certain associated factors of obtaining a credit.

Personal Loans
A personal loan is an unsecured loan that is borrowed as an all purpose loan, while a Credit Card loan is a cash advance drawn against the available credit limit.
A personal Loan has a high-interest rate as there is no collateral involved. The loan is advanced to fulfil the medical needs, to meet up vacation charges or even for debt consolidation at times. The unsecured loan also requires a lot of documentation and it may take a few days to gain approval, subject to the applicant’s profile.

Credit Card Loan
Credit Card Loan is a suitable option, when there is an immediate need of funds such as a lack of sufficient capital and a need for emergency loan. Credit Card Loan gives speedy access to cash. But then, for a Credit Card advance, you need utmost prudence and complete care. With Credit Cards, debt repayment may become impossible if the decision of investment takes a downturn. The interest rate on Credit Card loans can be very high and thus it is advisable to use these funds most judiciously. Top providers like SBI Credit Cards, HDFC, ICICI offers several schemes for loan against credit card at low interest rates.

Basic features of credit card loans and personal loans

The banks and financial institutions may reject your loan request when you don’t have a decent credit score. Even if you gain approval for the loan, the interest rate may be very high. So, improve your credit rating if you want affordable Personal Loan.  As for credit card advance, you need a card. The loan is extended as a percentage to the available limit.

To apply for a Personal Loan, you need to approach a bank with proper documentation. For Credit Card loan, apply online with your Credit Card credentials.

You repay Personal Loan in the form of EMIs each month; Credit Card Loan is however repaid at the end of the credit period.

While a Personal Loan is disbursed to the customer in a lump sum amount, the Credit Card advance is paid to the lender by swiping the card.

An unsecured loan may be taken for 5 years while the credit card advance repayment tenure is usually 45 days to 60 days. 

The borrowing limit for an unsecured loan is calculated on the basis of the proof of income while the borrowing limit for a credit card loan is determined on the basis of the monthly credit limit.

If you compare the real term rates, you will find that the rate of interest for a SBI Personal Loan is more competitive, compared to SBI Credit Cards.

There is no need to be a customer of HDFC Bank for HDFC Personal Loan but to avail a Credit Card Loan, you need to be an existing customer.

Credit Card Loan is taken for a short duration, unlike unsecured loans which can be raised for up to 5-6 years. If you want a loan for a long duration, apply for an unsecured Personal Loan.

If you need only a small amount of cash, then apply for a Credit Card Loan. Unsecured personal loan gives access to relatively higher sum of money.

You may borrow a Personal Loan for the child’s education, to meet medical expenses, home decoration, and for wedding purposes. On the other hand, when you want to make business purchases or meet a personal need, you can apply for a loan against Credit Cards


When to choose a Credit Card Advance?

If you wish to purchase something within the credit limit, apply for a Credit Card Loan. Also, when are not eligible for a Personal Loan, you can opt for a Credit Card advance.

When to apply for a Personal Loan?

            •          If you want a huge sum of money which exceeds your Credit Card limit

            •          If you plan to make an investment or purchase, and wish to pay over a period of time    

A word of caution:
Both Credit Card Loan and Unsecured Loans may turn nightmarish if you have no way to make the repayment. Thus, you must carefully assess your decision and build a sufficient credit repayment plan.