📝 Introduction
In our country, one question I have heard so many times is —
“Should I use a credit card or take a personal loan?”
Honestly, this confusion comes in everyone’s mind at some point. Whether you’re just starting your job or already working for many years — this doubt is quite common. Even I had this same question few years back!
Nowadays, life is very fast. Many times, we need money urgently — for medical emergency, home repair, education or even festival shopping. For such things, credit cards and personal loans are the two main options. Both give fast money. But the main thing is — which is better?
So in this blog, I will try to explain in a very simple way. No big financial words. Just plain and clear explanation, with examples that suit Indian people.
🏦 What Is a Personal Loan?
Let’s understand in simple terms.
Personal loan is when bank or NBFC gives you full money in one shot. It goes directly to your bank account. After that, you pay it back in small EMIs every month — usually for 1 to 5 years.
No need to give any gold or house as security. But they will check your salary, job and credit score before giving loan.
Mostly useful for big needs like wedding, home work, or large expenses.
💳 What Is a Credit Card?
Now credit card is little different.
With credit card, you don’t get money in your bank. You get a limit — like ₹50,000 or ₹2 lakh — and you can swipe card anytime for shopping, bills, travel, etc.
You have to pay that money later. If you pay full amount before due date — no interest.
But if you delay even 1 day, interest is very high — around 3% to 4% per month. That is around 36% to 48% per year. Very costly. So always be careful.
📊 Personal Loan vs Credit Card — Simple Table
| Feature | Personal Loan | Credit Card |
|---|---|---|
| Type | One-time money | Credit line (use anytime) |
| Interest | 10% to 18% yearly | 24% to 48% yearly |
| Repayment | Fixed EMI every month | Flexible or minimum due |
| Tenure | 1 to 5 years | No fixed time |
| Amount | ₹50,000 to ₹40 lakh | Based on card limit |
| Speed | 1 to 3 days | Instant (if card active) |
| Eligibility | Income + credit score | Income + credit history |
💰 Charges You Should Know
Many people ignore charges. But they matter.
| Charges | Personal Loan | Credit Card |
|---|---|---|
| Processing Fee | 1% to 2.5% | Usually Nil |
| Prepayment | 2% to 4% if you close early | Not needed |
| Late Payment Fee | ₹500 to ₹1000 | ₹100 to ₹1300+ |
| Over-limit Fee | Not applicable | ₹500 to ₹1500 |
👉 Credit card interest increases every month if you miss payment. It gets compounded. So bill becomes bigger and bigger.
🎯 When to Use What — Real-Life Situations
Let’s take 4 common examples from Indian life.
🎓 1. Education or Online Course
Go for personal loan.
You need full money in one go. EMIs will help manage your monthly budget.
🛒 2. Online or Festival Shopping
Credit card is better here.
You get cashback, discounts, and sometimes you can convert into EMI also.
🏥 3. Medical Emergency
Both are okay.
If your card limit is enough, use it. If not, many apps like CASHe, KreditBee give instant personal loan.
🏠 4. Home Renovation
Personal loan is better.
You need big amount and long repayment time.
✅ When to Pick a Personal Loan
Choose personal loan if:
- You need more than ₹50,000
- You want fixed EMI every month
- You have planned expense (like marriage, home work)
- Credit card limit is not enough
- You want lower interest rate
👉 Best for: salaried people or self-employed with regular income.
💳 When to Use Credit Card
Use credit card if:
- You can repay full amount within 30–45 days
- You shop often online or in stores
- You want cashback, points, discounts
- You need EMI on gadgets or shopping
- Expense is small and urgent
👉 Best for: people who track their expenses and always pay on time.
👍 Pros and Cons – Quick Look
| Point | Personal Loan | Credit Card |
|---|---|---|
| Pros | Low interest, fixed EMI | Flexible use, rewards, no interest if paid on time |
| Cons | More paperwork, some delay | High interest, risk of overspending |
📉 Credit Score in India – How It’s Affected
In India, CIBIL score is very important for loans and credit.
🟦 Personal Loan
- Shows as term loan
- Paying EMIs on time = Good for score
- Missing EMI = Bad for score
- Too many loans = Looks risky to banks
🔴 Credit Card
- Shows as revolving credit
- Using above 30% of your limit = Bad signal
- Paying full = Great for CIBIL
- Only paying minimum due = Lowers score slowly
💡 Tip: Try to keep usage below 30% of your card limit. Always try to pay full amount.
🧍 Real Story – Suresh from Bengaluru
Let me tell you a simple story.
Suresh, a 30-year-old IT guy from Bengaluru, needed ₹1.5 lakh for his brother’s wedding.
He had 2 options:
Option 1: Credit Card
- Limit: ₹2 lakh
- Interest: 36% yearly
- EMI: Around ₹40,000 interest
Option 2: Personal Loan
- From ICICI Bank
- Interest: 11.5%
- EMI: ₹3,300 for 5 years
- Total interest: ₹28,000
✅ He took personal loan.
Saved more than ₹12,000.
And his credit score also improved due to regular EMI payment.
🧾 Final Verdict – Quick Summary
| Situation | Best Option |
|---|---|
| Need small urgent money (₹5K–₹20K) | Credit Card |
| Big expense (₹50K or more) | Personal Loan |
| Can repay in 30 days | Credit Card |
| Need time to repay (6–24 months) | Personal Loan |
| Want cashback, rewards | Credit Card |
| Want low EMI and fixed schedule | Personal Loan |
🔚 Final Thoughts
So friends, both credit cards and personal loans are useful.
But only if we use them wisely.
👉 Credit card is good if you are very disciplined and pay full bill before due date.
👉 Personal loan is better if you want structured payments and lower interest.
💡 Just remember — never borrow money to show off or buy things you don’t need.
Borrow only when truly required.
🙋 FAQs – Common Doubts Indian People Ask
Can I convert credit card bill into personal loan?
Yes, many banks offer that. But check interest and fees before saying yes.
Which affects CIBIL more – loan or card?
Both are important. Paying EMIs on time and low card usage help your score.
Is credit card interest really that high?
Yes! If you delay payment, it can go up to 48% yearly.
Can I get loan using credit card?
Some banks offer that. But interest is usually higher than normal loan.
Which is easier to get – loan or card?
If you have regular salary, credit card is easier. Personal loan takes little more checking.
📝 My Final Advice
At the end of the day, money is yours. So use it carefully.
Don’t borrow because others are doing it. Don’t spend just to look rich.
If you use credit card and personal loan smartly, they can help you reach your goals.
Think wisely. Spend carefully. Pay on time.
Thanks a lot for reading! 🙏
If you liked this post, please do share it with your friends. I’ll try to write more simple guides for people like us.
Stay tuned! 😊