Personal Loan vs. Credit Card: Which Is Easier to Get Approved?

The history of loans began many years ago. It was prevalent even during the barter system when farmers borrowed capital and used livestock as repayment options. Ever since then, the process of borrowing and lending has evolved into a complex financial procedure. Then with the intervention of the digital era, things have been simplified more than ever. 

Table of Content

• Personal Loan
• Credit Card
• Difference between Credit Card and Personal Loan

As a society, we are always on the verge of discoveries, inventions and innovation. Corporations and entrepreneurs seek loans as they need capital to start their new ventures. Whereas, individuals seek loans for personal well-being or to address their financial emergencies. 

Loans are means that support business organizations and individuals with entrepreneurial mindsets to bring their vision into action, without which the progress of civilization would not be possible. 

Unlike the old days, in this digital era, you can avail of a personal loan instantly with the flexibility of repayment as you prefer. It also gives you the option to compare, allowing you to choose the offer with the best deal. Since credit cards have been prevalent for quite some time, accessing and availing of personal loans online came into the scenario only recently.

In this blog, we will talk about personal loans and credit cards, to see which one is easy to avail and serves the best.

Personal Loan

A personal loan is a type of unsecured loan meant for various purposes during financial emergencies such as medical reasons or leisurely uses such as expensive purchases. One can also use the funds for vacations or even to clear debts. Personal loans often charge fees which can add to the borrower’s total cost. 

Credit Card

Credit cards on the other hand provide the cardholder with access to funds that they can withdraw anytime, however it comes with a credit limit. It is the quickest way to obtain funds as it is a pre-qualified loan that does not require any documentation. Credit cards also offer benefits such as cashback when you make purchases using credit cards. 

Difference between Credit Card and Personal Loan

Credit Cards and Personal Loans come with their own set of pros and cons. So it is of utmost importance that you opt for the one only after understanding the purpose of borrowing and repayment capacity. Mentioned below are a few basis of differences between credit cards and personal loans to throw some light before you pick the one that aligns with your requirements.

• Eligibility – Loans on credit cards and a personal loan may sound similar however, they are not. You are eligible for a loan on a credit card only if you are a cardholder of any particular bank. Whereas, individuals don’t need an account from the same bank to avail of a personal loan.
   
• Procedure for borrowing – Credit card holders can avail of a loan by accepting a pre-approved offer extended by the bank. For personal loans, individuals need to apply to a bank or NBFC with proper documentation.
   
• Disbursement – For credit cardholders, the loan amount gets credited to savings or current accounts, or in the form of a cheque. In personal loans, customers receive the amount in their savings or current account, or via cheque.
   
• Approval Time – Credit card loans vs personal loans when compared, the approval time for credit cards is 24 hours than for a personal loan which is 3-5 business days.
   
• Tenure – The loan period may stretch from 1 to 5 years in both scenarios.
   
• Borrowing Limit—The limit of borrowing on the credit card is pre-approved and set by the lender. In contrast, personal loans require income proof, which the bank calculates before deciding the amount that you have applied for.
   
• Interest rates – The interest rates on credit cards are higher than on personal loans.
   
• Documents required – Credit cardholders do not need to provide any additional documents. In the case of personal loans, documents such as income proof, identity proof and address proof are required.

Suggested Read: 5 Things You Must Know Before Getting A Credit Card

Should you clear credit card dues with a Personal Loan?

At Muthoot Finance, we provide both secured and unsecured business loans as well as personal loans with minimum documentation and approval time. With our decades of rich experience, we make sure to meet the evolving needs of our customers.