It is common to hear myths about credit and credit scores floating around, such as no credit history means you have a perfect score. This is not true. Being ‘credit invisible’, which refers to having no credit history whatsoever, means that the CIBIL cannot provide credit reports or credit scores to these individuals. However, you can start your credit journey with simple banking services like personal loans or credit cards.
Many of us have been waiting for the next appraisal/bonus to finally make that big-ticket purchase. With payday days away and you need cash now, why keep waiting when you can always just swipe your credit card or get a personal loan? With these two banking services, you can easily build up your credit score as well!
From everyday purchases to emergencies, when you don’t have cash on hand, personal loans and credit cards are great financial tools to help with quick funds.
However, ultimately the choice between a personal loan and a credit card depends on your specific financial situation and needs. It’s important to carefully consider the pros and cons of each option and to make sure you can afford to make the required payments before borrowing any money. Let’s explore them to help you make the right decision.
Case Study 1: Personal Loans
Suppose you want to make a large purchase, like an international trip or renovating your home, but don’t have the funds upfront. In that case, a personal loan might be the right choice for you. Personal loans are unsecured loans, which means that you don’t need to pledge collateral for loan approval. Instead, the lender will look at your credit score and income to determine if you’re eligible for the loan and interest rate.
One significant advantage of personal loans is that they generally have lower interest rates than credit cards. This makes them a more cost-effective option if you need to borrow a significant amount of money. Additionally, personal loans have flexible repayment tenure* (*The tenure varies as per the terms and conditions of the lending institution), meaning you’ll know exactly how much you need to pay each month and for how long. This can help you budget and plan for your expenses more effectively.
With a higher borrowing limit than credit cards, online personal loans offer a more suitable option if you need to borrow a substantial amount of money. This can be particularly useful if you’re planning a home renovation or other significant expense.
Overall, fast personal loans are suitable for certain situations as mentioned above.
Case Study 2: Credit Cards
Now let’s say you need to make a smaller purchase, like a new laptop or a plane(flight) ticket. In that case, a credit card might be the better option for you. Credit cards are revolving lines of credit, which means that you can borrow up to a certain amount and pay it back over time.
Credit cards offer more flexibility – you can borrow as much or as little as you need. Much like personal loans, credit cards can also be used for a wide range of purchases. Additionally, many credit cards offer rewards programs, allowing you to earn points or cashback on your purchases. The approval process for credit cards is typically faster than for personal loans since the application process is simpler.
Credit cards generally have higher interest rates than personal loans, making them more expensive if you carry a balance. Unlike personal loans, credit cards have variable repayment terms, meaning your minimum payment can change each month. All in all, credit cards are your go-to financial tool for everyday purchases or small emergencies when you don’t have cash on hand. (The repayment schedule and other terms and conditions vary as per the policies of the lending institution)
Conclusion
Personal loans and credit cards each have their pros and cons, and the right choice depends on your specific needs and financial situation. If you’re looking to borrow a significant amount of money and want a fixed repayment term, a fast personal loan from banks like Karnataka Bank might be the better option. If you need more flexibility and want to earn rewards on your purchases, a credit card might be the way to go. Whatever you choose, make sure to do your research, compare your options, and make an informed decision.
