Anyone can need money at any time. In such situations, everyone needs to have an emergency fund ready. However, some people fail to do this and struggle to arrange money during emergencies. Many people opt for personal loans from banks, while others use their credit cards to arrange funds. Today, we will explain whether it is better to arrange money through a credit card or a personal loan. Let’s find out.
Do You Need to Be a Bank Customer?
If you are taking a loan through a credit card, it is not necessary to be a customer of the issuing bank. However, for a personal loan, you must have an account with the bank. Being a customer of the bank is essential when applying for a personal loan.
Loan Availability: How Many Times Can You Borrow?
With a credit card, you can take a loan multiple times as long as you repay the previous amount. The process is straightforward and does not require reapplication. However, for a personal loan, you will need to reapply every time you need a new loan. The entire application process will need to be repeated.
Grace Period for Repayment
Credit card loans offer a grace period for repayment. If you repay within this period, you won’t have to pay any interest. However, if you fail to repay within the grace period, you will incur high interest rates. In contrast, personal loans do not offer any grace period. You must start paying EMIs (Equated Monthly Installments) immediately after taking the loan.
Additionally, credit card loans allow you to convert repayments into EMIs. For personal loans, if you repay the loan before the agreed tenure, you may have to pay a prepayment penalty.
Which Option Is Better?
The choice depends on your financial need. If you require a small loan for a short duration, a credit card loan is more convenient. On the other hand, if you need a larger amount with more time to repay, a personal loan is a better option.