Overview
Both personal loans and credit cards offer access to funds, but they work differently. A personal loan provides a lump sum with fixed repayments, while a credit card offers a revolving line of credit.
When to Choose a Personal Loan
Personal loans are best for:
- Large, one-time expenses (weddings, medical bills).
- Debt consolidation (paying off high-interest debt).
- When you need a fixed repayment schedule.
When to Use a Credit Card
Credit cards are ideal for:
- Everyday expenses and small purchases.
- Earning rewards and cashback.
- Short-term financing if you can pay the full balance monthly.
Interest Rate Comparison
Personal loans generally have lower interest rates (10-20%) compared to credit cards (24-40% APR). However, credit cards offer an interest-free grace period if paid in full.
Repayment Terms
Personal Loans: Fixed tenure (1-5 years) with equal monthly installments (EMIs).
Credit Cards: Minimum due payment allows flexibility but can lead to a debt trap if not managed well.
The Verdict
If you need a large amount and time to pay it back, go for a personal loan. For flexibility and small spends, stick to your credit card.
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