Personal Loan v/s Credit Card Withdrawals
A personal
loan is easy to get, but do your research on cost, term and services.
Personal loans enable you to take care of instant necessities without much hassle. You do not have to provide security or guarantor; you can utilise the amount of loan for any purpose, except speculation. But, before taking, you should plan your requirements and assign the operating expense to be met with this loan.
The amount approved will depend on your eligibility, based mostly on your income. The repayment is monthly and the tenure varies from one to five years. Since personal loans do not require any security or hypothecation of resources, the banks charge higher interest rate compared to other secured or protected loan like home loan.
On the other hand, let's say you want to take the loan money through your credit card. How does this compare?
Foremost, withdrawing cash using a credit card can be very costly if you do not repay quickly. Interest rates on credit card loan withdrawals can range from 20-40 per cent on an annual basis. For nearly all cards, the interest rate on cash withdrawals and credit outstanding for purchases made are the same. But here is the kicker - for the purchases you make through your card, you get an interest-free period to pay back. Cash withdrawals on your card have no such benefits; interest is charged from the moment you withdraw the cash.
And, do not forget the transaction charge, levied on the withdrawal at the ATM. The average interest rate charged for a personal loan is in the range of 12-22 per cent , whereas the average interest rate is 20-40 per cent for withdrawal from a credit card.
Therefore, unless in a very real emergency where you need instant cash, it is advisable to not withdraw cash on your credit card. It is always better to go for a personal loan. It is the fastest of all retail loan products and the interest rates are a lot lesser than those on credit card withdrawals.
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