A personal loan is a financial tool that helps individuals get out of financial emergencies or to spend on a celebratory occasion. On credit, we can even purchase the latest gizmo or the best consumer durables. This is the impact of credit in our lives.
Loan Singh’s digital lending platform witnesses thousands of salaried individuals applying for a personal loan on its platform; every month. Gone are the days when applying for credit was considered a taboo. Everyone has multiple financial expenses to think about and a personal loan makes sense because of its collateral-free aspect. We will learn more on this later.
Credit card is another financial tool that allows a user to make purchases on credit within a pre-determined credit limit. This same credit limit prevents you from spending more than what you actually need. Over shooting the credit limit leads to a penalty which then subsequently affects your credit score. Did you know that you can actually apply for a credit card loan as well? But, before we understand what a credit card loan is, and how they differ from a personal loan, let us first look at what is a credit card?
What are Credit Cards?
Credit card is an unsecured financial instrument. It is unsecured because it does not involve any collateral. A credit card is a rectangular piece of plastic or metallic alloy that identifies your financial credit account (with the corresponding card provider or bank). It is a card issued by banks, or credit card companies, to cardholders that can be used as means to make payments to merchants.
The card issuer creates a revolving account, and grants a line of credit to the cardholder. The cardholder makes payments to the merchant via his/her card based on a credit limit assigned by the card company. The cardholder is then required to pay-back the amount spent along with the agreed interest and charges.
All credit cards contain a magnetic strip on the back which identifies your financial credit account. Also present on the card is an RFID chip (protection against fraud) along with your name, credit card number and card validity. 2 important terms to know are
Billing cycle – It is a period within which all purchases and payments are accounted for, and billed. It usually is of the length of 30 days. A grace period of 15-25 days is added to the total number of days of the billing cycle. No charges are incurred by the cardholder if the payment of previous month balance is done before the end of the grace period.
Minimum balance – It is the minimum amount to be paid to the credit card company, in case the card holder cannot pay the total outstanding amount by the due-date. It usually is 5% of the total balance.
What is a Credit Card Loan?
Credit cards have a provision for providing a credit card loan to the card owner. These are pre-approved and is either within or over the credit limit. You have to repay the credit card loan at the pre- approved date while being charged an interest fee. Every card issuing company has their own eligibility criteria for a loan on credit card.
The interest rates are generally high for credit card loan and if not paid on time, is levied with a penalty. A processing fee is charged for application of a credit card loan. Many times, a prepayment penalty is charged towards the foreclosure of credit card loan. No documentation or collateral is required for a credit card loan as you already are a credit card holder. The benefits of credit card loan are that you can break your expensive purchases into affordable installments.
Some card companies offer a balance transfer feature on the credit card loan EMI wherein you can transfer the outstanding balance on multiple credit cards to a single credit card and pay the EMI. The amount of credit card loan depends on the credit limit. A credit card loan does not require a loan guarantor or any post-dated cheques. Credit card loans are different compared to cash withdrawal using a credit card. The credit limit on cash withdrawals is lower than that provided as a credit card loan. The interest rate charged for cash withdrawals using credit card is higher than that for credit card loans.
What is a Personal Loan?
A personal loan or personal finance loan is a type of unsecured credit that is generally availed to meet urgent financial needs. Being an unsecured credit, a personal finance loan requires no collateral or mortgage. With no collateral required, it gets difficult for Loan Singh to find out about an applicant’s repayment capacity and his/her past defaults. Loan Singh does not meet the borrower face-to-face, like banks do.
Everything from loan application to amount disbursement is done online. To mitigate the prospect of risk, Loan Singh assesses the applicant’s creditworthiness using their credit report. If you have a good credit history, you have a better chance of avoiding a loan rejection. Your credit score indicates how prompt you have been with your past credit obligations.
Availing a personal loan via Loan Singh is advantageous because there is minimal paperwork involved. So, no time is wasted in cross verifying any paperwork. The personal loan amount, along with interest rate, is calculated for the entire tenure, and in case you want to clear-off the loan before tenure completion, no prepayment penalty is levied by Loan Singh.
The purposes for availing a personal loan are aplenty. Some of them are
- Overseas travel
- Celebration loan
- Gadget loan
- Medical expenses
- Used vehicle
- Online shopping
- Job relocation
- Home improvement
What is the difference between credit card loan and personal loan?
The one similarity is that both loans are provided after assessing your creditworthiness. Credit card loans are availed faster because the card issuer already knows your income and monthly credit card statement payment behavior. To avail a credit card loan, all you need to do is contact the customer care of the Credit Card issuer and request for a credit card loan. If eligible, the amount is credited to your account within 2-3 days. Credit card loan comes with 0.5 – 1% processing fee. They have pre-closure charges between 2-5% of the principal outstanding amount. Credit card loans come with an option for tenure as low as 6 months.
For a personal loan, the time from application to disbursement is close to 48 hours; if you have provided the correct bank statement to Loan Singh. As Loan Singh is a digital lending platform, everything is online and hence you need to attach your statement that is downloaded from your bank’s netbanking website. At Loan Singh, you don’t have to pay a prepayment penalty for pre-closure of loan. The shortest loan tenure available is that of 3 months.
Both offer substantial benefits based on your current financial scenario. So, what are your thoughts on personal loan and credit card loans? Let us know in the comments below.
About Loan Singh
Loan Singh is a digital lending platform that prides in providing online personal loan or unsecured personal loan to salaried individuals. You can apply for quick funds as an easy emergency loan which is not a bank loan. We provide a loan with the best personal loan interest rates. The instant funds, or instant loans, are loans between Rs.50,000 and Rs.5,00,000 taken for purposes such as:
- Home improvement loan/Home renovation loan
- Marriage loan/ Wedding loan
- Medical loan
- Used vehicle loan
- Consumer durable loan
- Vacation loan
- Debt consolidation loan
- Credit card refinancing loan
- Job relocation loan
- Travel loan
- Festival loan
- Gold jewelry loan
- Shopping loan
- Lifestyle loan
You can calculate your easy EMIs using our personal loan EMI calculator. We accept bank statement, PAN, and Aadhaar for quick loan approval. A bad credit score or credit report errors can lead to personal loan rejection. The ‘Loan Singh Finance Blog’ is one of the best finance blogs in India. Loan Singh is a product of Seynse Technologies Pvt Ltd and is a partner to the Airtel Online Store.
Loan Singh’s Online Presence
Loan Singh is not an anonymous digital platform. We are present on almost all leading social media platforms. All you need to do is look for us. You can find us on Loan Singh Facebook, Loan Singh Twitter, Loan Singh YouTube, Loan Singh Pinterest, Loan Singh Instagram, Loan Singh LinkedIn, Loan Singh Blogarama, Loan Singh Google Review, Loan Singh Medium, Loan Singh Reddit, Loan Singh Tumblr, Loan Singh Scoop It, Loan Singh Storify, Loan Singh Digg and Loan Singh Blogger.