Personal Loan vs. Credit Card: People use both personal loans and credit cards in times of emergency. But experts themselves have explained which one is easier to use.

Know which of the two is better in an emergency?

Personal Loan vs. Credit Card: Sometimes, an emergency arises suddenly, requiring immediate access to funds. A medical or financial emergency can strike at any time. In such a situation, people have two options: borrow money from someone, take out a personal loan, or use a credit card.

Although a personal loan or credit card is also a form of borrowing, both offer quick access to funds, but their methods and costs differ. Therefore, choosing the right option is crucial. But how? Let's explain.

What is a personal loan?
A personal loan is a lump-sum loan from a bank or financial institution. You must repay this amount in monthly EMIs over a set period of time. The interest rate is usually pre-determined, so you know the monthly installment amount.

What is a credit card?
A credit card provides you with a fixed credit limit that can be used whenever needed. If you pay the full amount by the due date, you typically don't have to pay any interest. However, if the payment is not made on time, you may incur significant interest and other charges.

Personal loans versus credit cards
have different uses. If you need a large sum of money, say, 2 to 5 lakh rupees, for a hospital bill or other major project, a personal loan is a better option. The EMIs are fixed, making repayment easier and often cheaper than carrying a credit card balance for a long period.

However, if you need a smaller amount, like 10,000 or 20,000 rupees, and you can pay the full amount when you receive your salary next month, a credit card is a better option. It eliminates the loan process and provides instant access to the funds.

Which is better?
When choosing a loan or credit card, don't just consider the interest rate. Personal loans may incur processing fees and EMI default penalties. Credit cards may also incur late payment charges, finance charges, and other fees. Therefore, consider the total cost before making your decision.