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The popularity of personal loans is known to most of us, right? But what about credit card loans, which have been cropping up as an alternative to personal loans? Credit card users who are eligible for both credit card loans and personal loans are often confused about which option to take.
So here is a comparative analysis of both these loan options to help you choose between the two and assess whether one is the alternative to the other:
Loan eligibility
When deciding whether or not to make a personal loan, lenders take into consideration a borrower’s credit score, monthly income, work and employer profile, and other factors. After applying, you can also check Bajaj personal loan status on the website or app.
For a loan secured by a credit card, however, the card issuer decides which cardholders are eligible for a pre-approved loan. This decision is made mostly on the basis of the card type, spending pattern, and bill payback history of the cardholder. To obtain a loan against a credit card from the card issuer, borrowers are required to have an existing relationship as a credit card user; however, there is no requirement for borrowers to have an existing relationship with the lender in order to apply for a personal loan.
The applicable rate of interest
The Bajaj Personal loan interest rates can range anywhere from 10 percent to 24 percent, depending on the lender as well as the borrower’s credit history and score. When it comes to loans secured by credit cards, the interest rates charged are typically roughly one percent more than those charged for personal loans. Therefore, it would be wise to go the route of a personal loan if you are able to wait for the loan disbursement for a week or so at the very most.
The processing time as well as the fees
When compared to other types of credit facilities, a loan secured by a credit card often has one of the quickest processing times. The money can be withdrawn from the account within a matter of hours after the loan is applied for. Due to the fact that loans against credit cards are pre-approved, existing cardholders who meet the eligibility requirements might avoid the requirement that they submit physical proof. Some card issuers also promise that the funds for these loans be disbursed instantly. A user of a credit card needs just file an online application either through internet banking or by contacting customer care support in order to avail themselves of the loan, provided that they are eligible. The processing fees that are associated with credit card loans might amount to as much as 2.5 percent of the loan amount.
Payslips, Individual Tax Return forms, and other documentation pertaining to the borrower’s identity and eligibility must be provided by the applicant in the case of personal loans before the loan may be disbursed. Because the process of document verification takes some time, personal loans are typically disbursed within two to seven days of the loan application being submitted. You can remain up to date about your application’s status by checking Bajaj personal loan status online. The processing fees involved can go up to three percent of the loan amount; however, many lenders waive these fees during holiday seasons or as part of limited-time offers.
Amount of the loan
The maximum amount that can be borrowed using a credit card as collateral is defined by the card issuer and is known as the loan limit. Even though the card user’s credit limit is temporarily blocked up to the amount of the loan that has been approved, which may have a negative impact on his or her ability to make purchases with that card, the limit will eventually be unblocked as long as the borrower keeps making the required monthly payments on the loan’s EMIs. Even beyond the credit limit that is available on the card, some credit card issuers have started extending loans to cardholders in the form of credit cards.
On the other hand, the sum of a personal loan typically falls between 50,000 and 20 lakh, while some lenders assert that they may grant even larger loan amounts, reaching up to a maximum of 40,000 lakh rupees. Keep in mind that the amount of the personal loan that is actually approved will, in the case of a personal loan, primarily depend on characteristics such as the borrower’s capacity for repayment and the chosen loan length. Also, remember that Bajaj Personal loan interest rates tend to vary across different loan amounts too.
Loan repayment tenure
The typical repayment period for a personal loan is between one and five years; however, some creditors will extend the maximum repayment period for a personal loan all the way up to seven years. Also, remember that just like you can check the online EMI calculator to arrive at the right EMI by choosing the appropriate tenure, you can utilize Bajaj personal loan status tool to be aware of your application too.
On the other hand, the repayment tenure for a loan secured by a credit card can range anywhere from six months to five years.
Prepayment charges
Depending on the lender, prepayment fees on personal loans might go as high as 5 percent of the loan’s original balance. However, because personal loans from banks are typically made available at variable Bajaj Personal loan interest rates, banks, particularly public sector banks, do not impose prepayment penalties. Keep in mind that prepayment fees on retail loans with variable interest rates cannot be charged by banks in accordance with the recommendations issued by the RBI. Don’t forget to check Bajaj personal loan status after applying for the loan so that you don’t remain anxious about the rejection or acceptance of the application.
When taking out a loan using a credit card as collateral, credit card issuers often levy prepayment fees of up to three percent of the total amount of the loan that is still outstanding because prepayment fees can eat up a sizeable portion of the overall interest savings generated upon making the prepayment, it is imperative that before deciding on the type of loan and the lender that you compare prepayment fees in addition to other essential parameters such as Bajaj Personal loan interest rates, tenure, loan amount, processing fees, and so on. This is because prepayment fees can be a deal breaker.
