Personal Loans v/s Credit Cards

Personal Loans and credit cards both are ways to borrow money. Although they provide the same thing, the main difference between them is – credit cards are plastic money which can be used to purchase things and to pay bills while a personal loan provides you borrowed money in your bank account which you can use as per your requirement & convenience. 

In both personal loans and credit cards, you will typically get funds from lenders against which they charge a specified interest rate. Both have easy repayments made through EMI which includes principal and interest both.

But beyond these similar attributes, personal loans and credit card share are way different from each other and choosing the best one can confuse individuals. So, to differentiate them well let’s explore the differences between the two-

Personal Loan:

Personal loans are unsecured loans, which means you get money without pledging any security. And repayments are made through monthly installments over a specific period of time known as the tenure of your loan. In the case of personal loans, it usually varies from two to five years. 

Credit Card:

Credit cards are plastic money that a lender provides you when you apply for it. This can be expensive from personal loans as the interest charged for the money used from your credit card is higher than personal loans. 

The card comes with a limit that can be used the same as cash to buy things or pay bills. But if you don’t pay off the outstanding balance on your credit card each month then it can cost you more. Another risk with credit card is carrying a high outstanding balance on your card can negatively impact your CIBIL.


Personal loans can be availed for a number of purposes ranging from bearing medical expenses to sponsoring your children’s education and from wedding to home renovation or to buy a second-hand four-wheeler. 

Whereas credit cards can be used for small and big purchases for your business and personal needs.

How to Borrow?

A personal loan can be borrowed just by applying online through the lenders portal along with some documentation process.

Whereas the same procedure can get you a credit card online.

Final Disbursement

For a personal loan, the loan amount is disbursed directly in the borrower’s account. 

For a credit card, after the approval card is delivered to you by post or else you can collect it from your provider’s branch office when applied offline. 


For a personal loan, repayments are simple through EMIs for a specific paid of time (tenure) 

For credit cards, customers need to pay the credit card bill for the money used from it. There is flexibility in terms of credit card repayment which is – you are allowed to pay the minimum balance and rest can be repaid in later.


Mostly ranges from one to 5 years. No time duration as in such but generally have an interest-free credit period ranging from 30 to 60 days.

Borrowing Limit 

It depends on the borrower’s profile such as income/repayment capacity and lenders’ policies as in up to what amount they can lend. For credit cards, the borrowing limit depends on the predetermined monthly credit limit and the credit limit again depends on your income and repayment capacity.

Interest rates

As the personal loans are unsecured hence the interest rate charged is a bit high as compared to other secured loans. And generally, it varies from lender to lender.

For credit cards, the interest rate charged on the money used is marginally higher than personal loans.

Knowing the major differences you can now clearly get to know which one is better for you. Remember, before you run to any conclusion to analyze your requirements first. 

Credit Card vs. Personal Loan: Which one is a Better Option?
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Credit Card vs. Personal Loan: Which one is a Better Option?
Is credit card better than personal loan? Choosing the best option always depends on a variety of factors. So, lets understand both in a better way through this blog.
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Finance Buddha
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