Credit Cards Vs Personal Loans: When To Use Which And Why

Credit Cards Vs Personal Loans

What is your go-to strategy when you need credit at any point in time in your life? You may either require a credit card or apply for a personal loan with a bank or a lender. These two options can be assessed separately and you can make the most of these two options available in the market with proper research and strategy.

What are credit cards and personal loans?

Credit Cards

  • Credit card loans are offered on the unutilised credit limit of the cards. The borrower is offered a loan with a specified interest rate and at a fixed repayment tenure by the lender. The credit cards and credit card loans can be utilized directly in-store or online and there is no need for documentation for these two sources. These cards come in a variety of options and provide a number of credit opportunities to the borrowers. The credit cards offer a maximum limit up to which a borrower can spend but these limits are extended regularly and timely. The introductory cards will have a zero-interest period for the borrowers. 
  • Credit cards work on the principle of revolving credit. Credit cards can also be secured or unsecured. The unsecured cards provide no collateral whereas the secured cards provide collateral which is generally the capital provided by the borrower.

Personal Loans

  • Personal loans come with an option within the category which can affect credit terms. A personal loan has a long-term balance which is different from credit cards. In the case of personal loans, there is no continuous access to credit as in the case of credit cards. But the repayment schedules can be extended for a personal loan. A personal loan comes with an interest rate that is lower than that of credit cards and the score affected is good to high for a personal loan. Personal loans can be secured or unsecured, that is they may or may not be backed by collateral. 
  • A personal loan is generally taken to finance large purchases such as houses, repairs for a house or building a house. The service and other fees are a part of the personal loan that is given to the borrower. In case of failure of payment by the borrower, the collateral property can be seized and sold by the lender.

When to Use Personal Loans and When to Use Credit Cards

  • Personal loans can be used when the quantum of expenses is large and home loans, car loans etc.
  • Credit cards can be used for smaller and more frequent expenses where the quantum is not much and the bill should also be cleared before the due date.
  • Personal loans are used to consolidate various high-interest rates into a debt which can help the borrower for repayment.
  • If the entire balance of the debt can be paid off within a short period of time then the credit card should be used.
  • Personal loans can be used when a longer repayment period is needed and the borrower needs cash for multiple payments.
  • Credit cards can be used in case the borrower needs the loan to be paid flexibly
  • Credit cards can be used if the borrower is in urgent need of funds.

Here is a table showing a comparison for both

Credit Cards
Based on the concept of revolving creditCan be secured or unsecuredRewards are offered on cardsComes with an introductory offerNo interest if full balance is paid every monthThe interest rates are higher than personal loansIt comes with a clause which can cause the borrower to be in debt forever if the credit limit is exceeded every time
Personal Loans
Based on the concept of repayment in installmentsCan be secured or unsecuredThe repayment schedule is also fixedCan be offered at lower interest rates than credit cards

Key Takeaways

  • Personal loans are borrowed in a lump sum over a finite period of time. They are offered at relatively lower interest rates and thus are easily available to the public at large. The process of availing of a personal loan is through the banks.
  • Credit cards are a revolving type of credit that is offered by the leading banks in the country. They give borrowers access to funds as long as they are in good standing.
  • The credit score is one common factor that influences both the availing of credit cards and personal loans. It decides the factors such as the interest rate at which the loan will be available and also the credit card interest rates for the borrowers.
  • Personal loans can be used to club the existing loans and offer a loan that has a lower-interest rate than all the existing loans of the borrower.
  • Credit cards can be used as a source of credit for purchasing even everyday items for a borrower. The borrower can then repay the monthly installment of the card.


There is no thumb rule as to when what type of credit facility should be used by the borrower. The borrower can solely make a choice depending upon the need and the credit availing capability of the borrower. Credit cards and personal loans both have their own pluses and losses and they can be assessed depending on different situations. The borrower can avail of a loan with the same ease nowadays as that of a credit card. The borrower will always have an option to reap the maximum benefits provided by both these instruments in any situation.


About Author

Greetings, I am Pankaj Pandey, a dedicated professional with eight years of experience in the dynamic field of digital marketing. My journey in this ever-evolving landscape began with a genuine passion for exploring the vast potential that digital platforms offer for brand promotion and customer engagement. Specializing in SEO, social media marketing, content strategy, and online advertising, I have cultivated a strategic mindset and innovative approach that sets me apart. My campaigns have consistently increased brand visibility and delivered measurable results, showcasing my adaptability to industry trends and technological advancements. As the site owner and author of, I combine my digital marketing expertise with insightful content creation. This platform reflects my commitment to sharing knowledge, providing valuable insights, and guiding businesses towards success in the digital era. My journey is a testament to my unwavering commitment to excellence and innovation in the digital marketing realm. I look forward to continuing to push the boundaries of what is possible in the ever-evolving world of online promotion.

Leave a comment

Your email address will not be published. Required fields are marked *

You may also like

The Best Robotic Pool Cleaners of 2022

The Best Robotic Pool Cleaners of 2022

Your swimming pool is a haven for family fun, from swimming lessons to family cookouts to late-night dips. But for

Removing Deep Scratches From Car At Home By Yourself?

Car scratches create the worst frustration and irritation situation for the car owners because whenever they see it, they get