Why Are Personal Loans Better Than Credit Cards?

Kajal Dasgupta
3 min readApr 5, 2022

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Personal loans are loans that you can borrow for different purposes. For instance, you can use the loan to consolidate debt, finance holiday expenses, medical emergencies, pay mobile phone bills, unpaid taxes, rental deposits, etc. These loans are unsecured, i.e., you need not submit collateral against the loan. On the other hand, a credit card gives the borrower access to a line of credit issued by the lender. Therefore, a credit card may be secured or unsecured. To choose the better option between personal loans and credit cards, consider some factors.

Credit Assessment

Lenders check the borrower’s credit score to assess their creditworthiness before offering a new credit card. If you don’t have a traditional credit score, you’ll have to wait to build one. This may not help if you have an urgent cash requirement. However, if you opt for an easy loan from a top fintech company, your creditworthiness would be assessed by a modern credit rating system called the Social Loan Quotient (SLQ). The SLQ score is evaluated using machine learning, artificial intelligence and big data analytics, based on modern factors like your smartphone metadata and social media footprint along with your credit score. Other simple factors include your KYC compliance, salary, career experience and educational qualifications. Therefore, getting a loan on a fintech company’s app can become easy.

Access to Cash

Every time you use a credit card to withdraw cash from the ATM, you usually pay a cash advance fee. This may not be useful when you need to make cash payments.

However, once a personal loan is disbursed to your account, you can readily withdraw it to finance any cash payments.

The Utilisation of the Credit

Credit cards come with a recommended credit utilisation ratio, usually 30%. If the ratio is too high, it can negatively impact your credit score. This can make it difficult for you to get new loans and credit cards.

There is no limit on utilising the funds of a personal loan. You can borrow up to ₹4,00,000 from a fintech company and use the entire money in one go or as and when you need.

EMI Facility

Not all credit cards offer the facility to pay the card balance in EMIs. Even if some cards have this facility, you may need to spend more than a certain amount to qualify to pay the bill in EMIs.

However, you can pay the whole amount of a personal loan in EMIs. If you take an easy loan from a fintech company, you can repay it in 90, 180, 270, 365 and 540 days via NEFT or IMPS.

Conclusion

You can see that easy loans are better and more flexible than credit cards, especially for urgent cash requirements and small-ticket expenses. So, opt for such a loan whenever you need instant money for any financial purpose.

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Kajal Dasgupta
Kajal Dasgupta

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