New Delhi: Have you been putting off your interior renovation plans due to lack of funds? Good news is you needn’t any longer. To finance your project, you can either go the traditional way and take a personal loan, or opt for a lesser known option i.e. take a loan on your credit card. However, before you choose either of these options, you must know what each of them have to offer. Therefore, to help you make an informed decision, here is a quick comparison drawn on some important aspects of both these options.



What Is It

Personal loans, also known as unsecured loans, have been a popular form of obtaining finance. These loans do not require the borrower to provide a collateral as security but charge a higher interest rate. Those with a higher credit score can bargain for a lower interest rate while those who have a low credit score usually end up paying a higher amount as interest. Credit card loans, on the other hand, are loans that connected to the un-utilized credit card limit which credit card holders have been provided with their credit card. These loans are usually offered as pre-approved loans.

Application process

When it comes to the application process, it is a bit more stringent for a personal loan, as compared to a credit card loan. To apply for a personal loan, one is usually required to provide extensive documentation like salary slips, bank statements, Form 16, KYC documents, etc. Loan processing itself can take up to 72 hours or longer. The process to avail a credit card loan is far simpler and requires almost zero documentation. All that the borrower has to do is call up the customer care department of their credit card provider and place the request for the loan. After the request is approved, which it is in most cases, the loan amount is credited in the card holder’s account shortly after.

Customers or Non-customers

If you are taking a loan from XYZ Bank, you do not necessarily have to be an account holder with that bank. However, to get a credit card loan, you must be a holder of a credit card offering this service.



The personal loan eligibility check entails a background check based on which the bank approves or rejects their personal loan application. The background check is done on the borrower’s financial standing, employment, and credit history, basically to determine the borrower’s repayment capability. On the other hand, a credit card loan can be availed against the credit limit offered on your credit card. There is no particular eligibility criteria for availing such as loan. If your credit card is offering this facility to you, then you are eligible. Keep in mind, credit card companies only offer this facility to select customers, which means inconvenience for customers who cannot avail this facility on their credit card and will have to seek other options. Under a credit card loan, the car limit being utilized as a loan will be blocked and will be released the EMIs are repaid.



Prepayment terms for personal loans can vary from lender to lender. Usually, pre-payment of a personal loan is allowed only after a specific number of loan EMIs have been paid. Prepayment of the credit card loan amount can be done easily, anytime.

Processing fee / Pre closure charges

The two common features shared by personal loans and credit card loans are the processing fee and the pre-payment fee. The loan processing fee can range from 0.5% to 1%. For instance, if you have taken a personal loan/credit card loan worth Rs.2 lakh, you will be charged a loan processing fee in the range of Rs.1,000 to Rs.2,000. If you wish to pre-pay your personal or credit card loan, you will be charged a fee which ranges from 2% to 5% of the outstanding principal loan amount.



It is no hidden fact that personal loans are one of the most expensive loans available in the market. Personal loan interest rates can go as high as 30%. However, the rate of interest offered by a lender on a personal loan will depend, to a large extent, on the borrower’s credit score. This is primarily because a majority of personal loans are offered as unsecured loans where no collateral being pledged as security. Borrowers who have a high credit score, a reasonably modest annual income, and fewer loan obligations, are most likely to be offered a low interest rate, starting from 11% p.a. However, in the case of a credit card loan, the interest rate charged will be lower than of a personal loan. However, you must check with your bank/credit card provider about the interest rate applicable before taking the loan.



Personal loans are offered for longer tenures than credit card loans. The average tenure for which you can take a personal loan extends from 12 months and up to 60 months. However, credit card loans are offered for much shorter tenures which go up to a maximum period of 24 months

Amount of loan

The amount provided under a personal loan can range from Rs.50,000 (which is usually the minimum required for application) to Rs.40 lakh or above. The maximum quantum of loan can also vary depending on the person’s employment status. However, the loan amount that is sanctioned may be lower than what you may have requested for as it depends on the borrower’s credit score, employment history and repayment capacity. In the case of credit card loan, the quantum of loan will depend on the lender’s policy and also the unused limit you have on your credit card, which can vary from user to user.


When it comes to borrowing funds, it is important to not just assess your requirements before approaching a lender, but also to weight the pros and cons of all available options before considering one.

personalloan – BingNews