When urgent funds are needed, many people consider either a personal loan or a credit card loan (cash advance or EMI conversion). Choosing the right option depends on your financial requirement, repayment ability, and interest rate preference.
This guide explains the differences, advantages, disadvantages, and scenarios where each option works best.
What Is a Personal Loan
A personal loan is a lump-sum, unsecured loan provided by banks or NBFCs.
Key features:
- Fixed loan amount credited directly to your account
- Fixed tenure for repayment
- Interest rate depends on income, credit score, and bank policy
- Can be used for medical emergencies, travel, weddings, or other personal needs
Personal loans are ideal when a specific sum is needed for a planned purpose.
What Is a Credit Card Loan
A credit card loan typically refers to using your card for cash withdrawal or EMI conversion on purchases.
Key features:
- Borrow from your existing credit limit
- Can convert large purchases into monthly EMIs
- Interest is charged if full payment is not made
- Instant access but usually higher interest rates than personal loans
Credit card loans are convenient for short-term, small-to-medium expenses.
Interest Rates Comparison
Interest rates are a major difference between the two:
- Personal Loan: Generally lower interest (salaried: competitive, NBFCs may vary)
- Credit Card Loan: Higher interest if not converted to EMI; EMI conversion has processing fees
- Long-term repayment is cheaper with personal loans
- Credit card loans are expensive for prolonged repayment
For large sums, personal loans are cost-effective.
Repayment Flexibility
- Personal Loan: Fixed EMIs with predictable repayment schedule
- Credit Card Loan: Flexible if EMI option is chosen; otherwise high interest on revolving balance
- Longer tenure options are usually available only with personal loans
Planned repayment is easier with a personal loan.
Loan Amount and Eligibility
- Personal Loan: Higher loan amounts (up to several lakhs depending on profile)
- Credit Card Loan: Limited to your available credit limit
- Personal loans often require a good credit score and minimum income
- Credit card loans are instant if card limit is available
For big financial needs, personal loans are better.
Processing Time and Documentation
- Personal Loan: Requires application, income proof, and verification; disbursal may take a day or two
- Credit Card Loan: Instant or same-day access via app, ATM, or EMI conversion
- Credit card loans are faster but limited by your credit limit
For urgent small needs, credit card loans are convenient.
Fees and Charges
- Personal Loan: Processing fee applies (sometimes waived on special offers), prepayment possible
- Credit Card Loan: Cash advance fee, EMI conversion fee, and high interest if unpaid
- Hidden charges may apply on credit card loans if full payment is delayed
Cost-conscious borrowers often prefer personal loans.
Best Use Cases
- Personal Loan:
- Medical emergencies
- Weddings or large personal events
- Travel or relocation
- Debt consolidation
- Credit Card Loan:
- Minor emergencies
- Online purchases or electronics with EMI option
- Short-term liquidity needs
Choosing the right option depends on urgency, loan amount, and repayment capacity.
Advantages and Disadvantages
Personal Loan:
Pros: Fixed EMIs, predictable repayment, lower interest, higher loan amount
Cons: Slightly slower disbursal, requires documentation
Credit Card Loan:
Pros: Instant access, flexible EMI conversion, convenient for cardholders
Cons: Higher interest, limited amount, fees can add up, risk of revolving debt
Final Verdict
- If you need large funds with predictable repayment, a personal loan is the better choice.
- For small, urgent needs or short-term purchases, a credit card loan works well.
- Always compare interest rates, repayment tenure, and fees before choosing.
Prudent usage of either option ensures that your financial needs are met without accumulating debt unnecessarily.