In today’s time getting credit has become easy. There are various options available for one to receive funds in and s. Two of the most common tools are an instant personal loan and a credit card. Often people get confused as to which option is better for them.


While credit, in either case, is available instantly, it does not require much effort and documentation. However, there still are some differences between the two. Let us look at how an instant personal loan can be a better option than a credit card.


Why Are Personal Loans Better Than Credit Cards?

  1. Instant cash requirement: If you are planning a major purchase through your credit card, you are provided with a buffer of a month to repay the amount. If there is an option of EMI, then you can use it to increase your repayment tenure in credit card, but that would also reduce your card limit for the next month.

    However, the case is not the same in personal loan. Once the loan amount has been borrowed, you have to pay the principal amount along with the interest in the tenure at the time of loan approval.

  1. Utilising the credit limit: In a credit card, there is a specified limit of the card. If you are purchasing an item that consumes a major percentage of your card limit, then it can hamper your credit score. In the case of a personal loan, you have liquid cash to make all your purchases upfront which will help in increasing your credit score.
  2. Lower Interest rate: Instant personal loans are financial tools that offer you credit which you can pay over the long term, thus, their interest rate is reasonable and fair. However, in the case of a credit card, it provides you instant credit which has to be repaid in the next cycle, so the interest rate charged is also very high. If you have a 0% intro APR offer, then a credit card can help.
  3. Impact on credit score: While a credit card is believed to help in increasing the credit score, the utilisation ratio plays a major role. It is the percentage of credit (over 30%) outstanding relative to the complete credit limit available. A larger balance on a credit card, increases your utilisation ratio, thus reducing the credit score.

    A personal loan may impact your credit score, but if you make timely payments, you can bring back your credit score to normal. It is normally believed that an instalment loan is more favourable than a revolving debt of your credit.

  1. Having a structured payment: One important difference between a personal loan and credit cards is their disbursal and repayment. While for a credit card, the balance amount has to be paid, which keeps on growing if not paid on time. The longer repayment period leads to more interest rate.

    Personal loan however is different, the cash is credited into the account of the lender in one go, with a repayment plan. Right from the start, the borrower knows how much has to be paid for each month. You can use the personal loan calculator to know the EMI.

    So, credit cards are like open-ended loans, with no fixed duration of payment, however, a personal loan comes with a repayment tenure.

  1. Debt Consolidation: If you are someone who has a lot of balance on a credit card, a personal loan will help in consolidating it and save you from paying a high-interest rate. The same is not true for a credit card.

    The above points indicate how a personal loan is a better credit option than a credit card for long term engagement.



A credit card is a great way of managing your expenses, as it gives you an idea about how much you have spent in the last month. A personal loan, however, cannot do that. Based on your requirements and the need, you can choose whether you want a personal loan or a credit card.

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