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Tata Capital > Blog > Personal Use Loan > Know the Difference Between Credit Card Loan vs. Personal Loan

Personal Use Loan

Know the Difference Between Credit Card Loan vs. Personal Loan

Know the Difference Between Credit Card Loan vs. Personal Loan

Are you in need of liquid funds urgently? There are two easy ways to conveniently manage your financial emergencies- either take an online personal loan or take a loan on credit card.

But how do you decide the best option for you?

In this blog, we'll explain both these types of loans in detail and understand credit card vs. personal loan differences so you can make an informed decision.

Credit card loan

Your credit card has a pre-approved limit that you can spend every month. But if your financial requirement exceeds this limit, you can opt for a credit card loan.

Most lenders allow you to take a loan against your credit limit. When they approve your request, the limit is automatically credited to your account. Loan on credit card facility is usually pre-approved, so you don't have to submit any new documentation to access more funds.

You can easily repay the loan through affordable EMIs. 

Instant Personal Loan

A personal loan is a multi-purpose, unsecured form of credit. You can use it for any reason ranging from vacations to medical emergencies.

When the lender approves your instant personal loan application, you receive the entire loan amount as a lump sum for a pre-decided tenure. However, as personal loans are unsecured, they come with high-interest charges.

Most lenders offer online personal loan facilities where all you need to do is visit their official website, fill out the online application form, and submit it along with the required documents. After the lender verifies your eligibility and approves your online personal loan application, you'll receive the funds directly in your bank account.

Credit card vs. personal loan: Key differences

BasisCredit card loanInstant personal loan
DocumentationA loan on credit card is usually pre-approved. Therefore, you don't need to submit any new documents.To avail of a personal loan, you need to submit the required documents to verify your personal and financial details.
Loan amount and tenureA loan on your credit card is ideal if you require a small amount of loan and can repay it in a short tenure.If you're looking for a higher loan amount, then an online personal loan is the best for you. It also has a longer loan tenure, allowing you to make EMI payments comfortably.
Rate of InterestCredit card loans in India usually come with an interest rate of 10-18%. However, this is a flat rate which means you'll have to pay a fixed interest every month even though your principal loan amount keeps reducing.You can get a personal loan at interest rates ranging between 13% and 22%. But unlike a loan on your credit card, you can get a personal loan on reducing balance rates. This means your monthly interest outflow keeps decreasing along with the principal amount.
Credit score requirementYou can avail of a credit card loan only if your credit score exceeds 700A personal loan also requires a good CIBIL score. Besides helping you get the lender's approval, it also allows you to enjoy lower interest rates.

Pros and cons of credit card loan


  • Taking a loan on your credit card is the most convenient option when you're in urgent need of funds. In addition, it does not require any extra documentation, accelerating the entire process.
  • With a good CIBIL score, you can enjoy 0% introductory interest rates, repayment grace periods, and exciting rewards.
  • It allows you to convert big expenses into comfortable EMIs.
  • It has a lower interest rate as compared to personal loans.


  • You must maintain a CIBIL score of over 700 to avail of a loan on your credit card.
  • You can only use your credit card for digital payments. If you need hard cash, you'll have to pay higher interest.
  • You'll have to bear other fees and charges like annual fees, late fees, etc.

Pros and cons of online personal loan


  • Personal loan eligibility has less stringent eligibility criteria as compared to credit cards.
  • They allow you to borrow a higher loan amount and repay it comfortably over a longer loan tenure.
  • It gives you access to a lump sum amount which you can withdraw in cash. 
  • You can easily apply for a personal loan online or offline, depending on your preference.
  • As soon as the lender approves your request, you'll receive the loan amount in your account within an hour.


  • As it is an unsecured loan, it has a higher interest rate.
  • Other fees and charges, like processing fees, can further increase your loan burden.
  • If you don't have a good CIBIL or credit score, you'll have to pay a higher interest rate.
  • You'll have to submit the required documentation, which can increase the processing time of your application.

Credit card vs. personal loan: Decide for yourself

In the battle of credit card vs. personal loan, there is no winner or loser. The best option depends on your requirements, repayment capacity, eligibility, and credit score.

If a personal loan is your ideal match, you can get the best interest rates and flexible EMI options at Tata Capital. Apply online through our website today.

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