Credit Card Loan or Personal Loan: Which one is cheaper?

Nowadays, in the hectic financial landscape, individuals are required to have money at their fingertips, be it in case of an emergency or in case of scheduled expenditures. And two of the most popular borrowing products in India are:

• Credit Card Loans
• Personal Loans

Both of them are unsecured, both are fast to approve, and both give you cash when you require it. Yet they are very different in the way they work–and the amount you are finally paying may change a great deal.

When you are not sure whether you want to take a credit card loan or a personal loan, this is the detailed guide that can help you make a decision, which will save you the greater part of money, which will have the minimal interest and which will be appropriate to your financial purposes.

Let us divide it into an easy, straight, and non-emotional manner.

1. What Is a Credit Card Loan?

The credit card loan is a pre-approved loan given to you by your credit card issuer based on your credit limit and the history of how you have repaid. As opposed to credit card revolving credit (3 4% monthly interest on outstanding), a credit card loan has:

• A fixed interest rate
• Fixed EMIs
• A fixed tenure
• The loan amount as a proportion of your card limit is blocked.

Types of credit card loans:

1. Loan on Credit Card- It is a short-term or medium-term loan that is provided immediately.
2. EMI Conversion Loan -Convert purchases to easy EMIs.
3. Pre-approved Loan Beyond Card limit- Some banks issue loans to you more than your available limit.

It is fast and easy–credit card loans are, however, costly.

2. What Is a Personal Loan?

A personal loan refers to an unsecured loan which banks, NBFCs and digital lenders offer to you depending on your:

• Salary
• CIBIL score
• Bank statements
• Credit history
• Repayment capacity

It comes with:

• A fixed interest rate
• EMIs
• A minimum of 6 months tenures and a maximum of 6 years.
• Loan amounts from ₹10,000 to ₹40 lakh

The reason behind the popularity of personal loans is that they are structured, predictable and comparatively cheap.

3. Credit Card Loan vs Personal Loan: Quick Comparison Snapshot

Feature	Credit Card Loan	Personal Loan
Interest Rate	High (16%–36% p.a.)	Lower (10%–24% p.a.)
Tenure	Shorter (3–36 months)	Longer (6–72 months)
Loan Amount	Small–medium	Medium–high
Eligibility	Based on credit card usage/history	Based on income + CIBIL
Approval Time	Instant	Instant to 24 hours
Documentation	Zero	Basic KYC + income docs
Processing Fee	Low or zero	1%–3% usually
Impact on Credit Limit	Reduces the available limit	No effect

Now let’s go deeper.

4. Interest Rates: Which Alternative is More Economical?

This is the greatest determinant between credit cards and personal loans.

Interest Rates on Credit Card Loans.

A majority of banks range between 1.2-2.5 per cent per month,h which amounts to:

• 14% to 36% per year

Personal Loans Interest Rates.

Banks and NBFCs tend to charge:

10% to 24% per year

Who wins?

Personal loan wins clearly.

Although the processing fee may be a little higher, the interest chargeoverof the entire tenure is normally low. A personal loan is much more economical when one wants to borrow over a period of 13 years.

5. Loan Amount: Which Alternative Proffers More?

Credit Card Loan

Depends on credit limit- usually:

• ₹10,000 to ₹5,00,000
• It can only be used to an extent of your credit limit.
• Top-up loans come in emergency form, depending on the bank.

Personal Loan

Much higher amounts:

• between 10000 and 400000 based on income and qualification.

Who wins?

By a far margin, personal loan.

Credit card loans will not assist in case of requirements of more than 2 3 lakh.

6. Speed of Approval and Disbursement.

Credit Card Loan

• Often instantly approved
• Cashed into your bank account within minutes.

Personal Loan

• Digital lenders → 5 minutes- a few hours.
• New banks require a few hours per working day.
• Needs verification of documents.

Who wins?

Credit card loan- a bit quicker.

 However, personal loans now (more so the digital-first lenders on platforms such as CreditMitra) are also very fast.

7. Flexibility of Tenure of Repayment.

Credit Card Loan Tenures

• 3 to 36 months
• Reduces, which amplifies the amount of EMI.

Personal Loan Tenures

• 6 to 72 months
• Longer, which decreases the burden of EMI.

Who wins?

Personal is a lot more flexible.

8. Processing Fee and Other Charges.

Credit Card Loan

• Typically reduced processing charges (0%2). Some banksdoo not charge a processing fee.
• Many banks nhave o first 6 months.

Personal Loan

• Processing fee: 1 per cent to 3 per cent of the loan value.
• Foreclosure permitted in 612 months based on the lender.
• Charges vary by bank/NBFC.

Who wins?

Credit card loans are cheaper to initiate than small loans.

 Personal loans guarantee better savings on interest in the long run, in case of a higher loan amount.

9. Effect on Credit Score

Credit Card Loan

• Borrowings using your current credit limit.
• High usage would be detrimental to your score.

Ex: Assuming that you have a limit of 1,00,000 and take a loan of 80,000-utilisationn will be 80 per cent- very bad with CIBIL.

Personal Loan

• No influence on credit card limit.
• Gives you more credit in your profile.
• On-time EMI payments increase rating.

Who wins?

Personal borrowing — good for the long-term credit score.

10. Comparison of Cost: Which Cost really saves the money?

Let’s take a ₹1,00,000 loan amount.

Scenario A — Credit Card Loan

Loan Amount: ₹1,00,000

Interest Rate: 24% per year

Tenure: 12 months

EMI: ~₹9,400

Total Interest Paid: ~₹12,800

Scenario B — Personal Loan

Loan Amount: ₹1,00,000

Interest Rate: 14% per year

Tenure: 12 months

EMI: ~₹9,000

Total Interest Paid: ~₹7,200

Personal Loan Total Savings.

Saved 5600 on a small loan of 1 lakh in a year alone.

As loans increase in size and in term the increase in savings is larger:

On ₹5 lakh → savings may cross ₹30,000

On 10 lakh -100,000 in less interest.

Clear Winner

A personal loan saves much more money.

11. What are the times to take a credit card loan?

Credit card loans are appropriate in the following circumstances:

You need very small loans.

5,000 to 50,000- cheaper than revolving credit.

When you need instant cash

The process is quicker compared to the majority of loans.

When you are not in a position to apply loan during non-banking hours.

The system of card loans is computerized-24/7.

Where the credit score is average, yet the credit card repayment history is good.

Card loans are provided by banks on an internal scoring basis.

In case the term of a loan is short.

A 3-6 month loan will be controllable.

12. In Which Cases Do You Go with a Personal Loan?

The best alternatives to use include personal loans when:

• You require a larger loan amount ( 50,000-40 lakh )
• You would like the interest rates to go down.
• You would like EMIs that are within your monthly budget.
• You plan to repay over 1–5 years
• You need to raise your credit rating.
• You would like a predictable, structured loan product.
• You would like to be able to prepay early.
• You would not wish to have your credit card limit blocked.

13. Personal vs. Credit Card Loan in the case of an emergency.

Medical emergency Personal loan.

Reduced interest + increased sums.

Lack of cash flow to pay the salary before the salary credit card loan.

Faster access to funds

School/college fees/ huge costs,/ Personal loan.

Better EMI flexibility

Cash requirement in 3 months, temporary → Credit card loan.

If interest is manageable

14. Conversion of Personal Loan to Credit Card EMI.

A large number of individuals mix up a credit card loan and a credit card EMI. They’re different:

• EMI conversion = EMI to convert an already made purchase.
• Credit card loan = New loan provided to you.

The EMI interest rates (0-24) differ according to the brand and offer.

Nonetheless, personal loans are usually cheaper.

15. Which One Saves You More Money Overall?

Let’s summarise where each option stands:

Category	Winner	Why
Interest Rate	Personal Loan	Lower cost
Tenure Flexibility	Personal Loan	Longer EMI options
Approval Speed	Credit Card Loan	Instant
Processing Fee	Credit Card Loan	Often lower
Large Loan Amounts	Personal Loan	Much higher limits
Impact on Credit Score	Personal Loan	Healthier utilization
Total Savings Over Time	Personal Loan	Biggest money-saver

16. Final Decision: What Is the Best Alternative?

It is merely the plain, uncomplicated financial rule:

• Take a credit card loan, as you need quick, small, short-term money.
• When you require low-interest, low-cost borrowing, then a personal loan.
• To save money long-term, almost always goes to a personal loan as the winner.

There is a victory to credit card loans in convenience, and personal loans in affordability.

In case you are aiming to have the financial stability and lowest cost of borrowing, then in case of a personal loan, the help of a reputable online loan offering site such as CreditMitra will help you compare interest rates, select the most appropriate lenders and save money with low EMIs.