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Why Choose Between Personal Loans Over Credit Cards for Urgent Needs?

Despite our efforts to keep our finances under control, emergencies can occur anytime. In that condition, getting instant help is crucial. Often, people quickly jump on to credit cards. However, they come with heavy interest rates. Another option is getting a personal loan, which comparatively comes at a lower cost. Evaluating these two options to make the right decision can be challenging for many.

This article aims to help you understand which option can be better. We’ll look at both choices with simple explanations, focusing on what matters to you: ease, cost, and managing your money wisely.

personal loan credit card

Personal Loan vs. Credit Card

When you need money quickly, it’s important to know the difference between a personal loan and a credit card.

  1. Personal Loan: Think of a personal loan like borrowing a set amount of money from a lender. You agree to pay it back in regular amounts over a certain time. These loans are often unsecured, which means you don’t need to offer something you own, like your home or car, as security.
  • Advantages: The interest rate stays the same, so your payments are predictable each month. Usually, personal loans have lower interest rates than credit cards and you don’t need to offer any of your belongings as security.
  • Disadvantages: You’ll need a good CIBIL score to get one. It might take longer to get a personal loan than to use a credit card. 
  1. Credit Card: A credit card, on the other hand, gives you a line of credit that you can keep using and paying back. You can borrow up to a certain limit and then pay back either all or part of what you owe each month.
  • Advantages: You can access your credit instantly. You can also choose how much you pay back each month and earn rewards like points or cashback.
  • Disadvantages: If you don’t pay off your balance in full, the interest can be high. It’s easy to spend more than you planned because you can keep borrowing up to your limit.

Why Choose Personal Loans for Your Urgent Needs?

When it comes to large amounts of money urgently, it is easy to get confused regarding the choices you have and what should be the better choice. So, here we have listed down some reasons why a personal loan should be your choice during emergency situations:

  • Steady Monthly Payments: Personal loans let you know exactly what you owe each month. This makes it easier to budget your money and plan ahead without surprises.
  • Lower Costs Over Time: The interest rates on personal loans are usually lower than those on credit cards. This means you end up paying less in the long run.
  • No Need for Collateral: Most personal loans don’t require you to provide collateral. So, you don’t have to worry about risking your house or car.
  • Bigger Loan Amounts: Often, personal loans allow you to borrow more money than you could with a credit card. This can be really helpful for big emergencies.
  • Longer Repayment Terms: Personal loans usually come with longer repayment periods. This means you can spread out your payments over time, making them more manageable.
  • Quick Processing: Many lenders now offer fast processing for personal loans, meaning you can get the money you need without a long wait.
  • Improves Your Credit Score: If you repay the loan on time, a personal loan can help improve your CIBIL score. This can be useful for your future credit needs.

Calculating Your Loan with a Personal Loan EMI Calculator

Figuring out how much you’ll need to pay back each month for a personal loan is really important. That’s where a personal loan EMI calculator comes in. Here’s how it helps:

  • Easy to Use: Just put in the amount you want to borrow, the interest rate, and how long you’ll take to pay it back. The calculator does the rest.
  • Know Your Monthly Payments: It tells you the exact amount you’ll pay each month. This way, there are no surprises.
  • Plan Your Budget: By knowing your monthly EMI, you can see how the loan fits into your monthly expenses. This helps in making a good budget.
  • Compare Different Options: You can experiment with different loan amounts or time periods to see how the EMI changes. This will help you find the best loan for your needs.
  • Understand Total Interest Payable: It also shows how much interest you’ll pay over the life of the loan. This helps you see the total cost of borrowing.
  • Make an Informed Decision: With all this information, you can decide if the loan is right for you and if you can afford it.

While both personal loans and credit cards have their advantages, an emergency personal loan often is the more sensible option for urgent financial needs. The predictability and lower interest rates of personal loans make them a better choice for managing unforeseen expenses without falling into a debt trap.

Shitanshu Kapadia
Shitanshu Kapadia
Hi, I am Shitanshu founder of moneyexcel.com. I am engaged in blogging & Digital Marketing for 10 years. The purpose of this blog is to share my experience, knowledge and help people in managing money.