Personal loan or a credit card? It’s a dilemma that hovers around many borrowers facing a short-term cash crunch. From a distance, both seem like different ways to the same solution for a cash crunch – but can turn out to be fairly different on closer inspection. In this post, we’re here to resolve the conundrum about the choice of a suitable lending source, and help you fulfil your bucket list with favourable options.

Fundamentally, both credit cards and personal loans are unsecured loans i.e. they do not require any collateral. Both are a popular method of deferring payments on your expenses (seeing increases of 26-28% in adoption annually). However, they differ from each other in many other ways that can save you money and plenty of time.

Let’s read more to understand the differences and make an informed choice.

You need to directly approach a bank or financial institution offering personal loans. This requires documentation and maybe a time-consuming process. With credit cards, you may simply swipe and make your purchase with the vendor. However, in a country like India where cash is still the king and digital India may still be a dream, a personal loan comes handy. What’s even better is that with apps like EarlySalary, you can get instant approval with no paperwork.

Another key difference is the interest rate charged for repayment. Loans on a credit card come at a high-interest rate that ranges from 16-20% to even 30%, which is much greater than the interest rate on personal loans. Cash withdrawals through credit cards are also charged at fairly high rates. Considering the inflation rate, the interest rate paid on personal loans is almost negligible.

The interest rate paid on credit cards is mostly fixed, whereas the interest rate on personal loans is variable.

You can repay the entire personal loan whenever you can during the course of repayment. However, credit card bills have to be paid at regular intervals as and when you spend. Non-payment may attract a hefty penalty and negatively affect your credit score.

The disbursement of the personal loan is typically done via a lump sum transfer to the borrower’s account and can be used at the borrower’s discretion for travel, shopping, home improvements, etc. Personal loans generally provide greater borrowing limits than credit cards and can be used to finance large expenses or consolidate debt.

With so many personal loan apps available in the market today, choosing the right one can be tricky. Consider the following parameters before taking a personal loan.

Hassle-free approval:

You can apply for a personal loan through the EarlySalary app with just a few taps on your phone and get instant approval. The documentation and processing take minimal time and the transfer is made whenever you want the money. The EarlySalary app requires zero paperwork and provides a secure platform to borrow with a flexible borrowing limit.

Instant disbursal:

Unlike many other time-consuming borrowing options, EarlySalary tells you how much cash we can lend you immediately after assessing your particulars and your Social Worth Score. You can either avail cash transfer directly to your bank account, or shop with our partners and pay later in EMIs at no extra cost.

Liberty to use funds for any purpose:

Whether it’s the long-planned family vacation or those speakers with surround sound capability, EarlySalary lets you decide and disburse the funds. This is the biggest advantage of a personal loan – it does not limit you towards one thing as in the case of a car or home loan.

Easy and cheap repayment:

EarlySalary charges as you use the money. This means that EMI has to be paid only for the number of days you use the money. There are no hidden costs or prepayment charges.

The increasing interest in personal loans from the broader market is obvious – over 96% of all new bank loans in FY18 were personal loans. The market sentiment is clear – folks aren’t going to let short-term money crunch ruin their plans, and you shouldn’t either. Grab a personal loan and pay later with flexible EMI options on Early Salary.