In the past few decades, we have seen the rise of a lot of new financial products, mainly in digital lending platforms. With so many options available in the market, it might get confusing for individuals, especially when it’s between similar products such as Personal Loan and Credit Card, to use them to their best, it is important to understand the key difference between them and what are the key featured provided by each of them. Today, we will be talking about the difference between a Personal Loan and a Credit Card, to let you decide which one fits best for your needs.
What is a Personal Loan
A Personal Loan or PL is an unsecured loan offered by a bank or an NBFC, typically for larger purposes where a larger sum of money is required, such as medical expenses, a wedding, education, travel, or debt consolidation. PLs are given in a lump sum, and the repayment can be made the same way, but the most preferred way is using EMIs(Equated Monthly Instalments) over the pre-decided period. Nowadays, you can get personal loans with minimal procedures, as sometimes banks would have pre-approved your loan for a smoother transaction.
What is a Credit Card Loan?
Credit card loans are offered up to your credit card limit. This can be in the form of conversion of your outstanding amounts into EMIs or pre-approved loans according to your credit card limit, but sometimes, according to credit worthiness and usage of the card, the loan amount can be over and above the limit. These types of credit are much faster and can be applied for instantly without any paperwork. The loan amount is directly credited to your account or adjusted as an EMI on your credit card bill.
| Difference between Personal Loans and Credit Loans | ||
| Features | Personal Loans | Credit Card Loans |
| Interest Rate | 9%-6% p.a | 13%-24% p.a |
| Loan Amount | Rs 50000 – Rs 40L plus | Limited to the available credit limit |
| Processing Times | 24-72 hours (or instant) | Instant (pre-approved) |
| Repayment Tenure | 1-5 years | 3-60 months |
| Prepayment Charges | 2%-5% (may apply) | Often zero or low |
| Credit Score Impact | Moderate to High | Low to moderate |
| Purpose | Any large or planned expense | Small, short-term needs or purchases |
When to Choose a Personal Loan
- A large sum of money is required, for example, wedding, medical expenses, home renovation, etc.
- Want a longer repayment tenure and fixed EMIs for better budgeting.
- Having a good credit score can get you a loan at better interest rates
- When funds are needed beyond the credit limit
- Consolidate debt (to merge multiple loans into one)
Additionally, personal loans could offer better interest rates if your credit score is high enough. And many financial institutions offer customisable and flexible prepayment options, EMI plans, in order to reduce your burden.
When to Choose a Credit Card Loan
- Need quick funds for an emergency, and already have a credit card.
- When there are offers such as 0% or low interest rates on gadgets or appliances
- The loan is small
- You can repay the loan amount in a short period of time.
In 2025, many banks are providing no-cost EMIs on credit cards, which is a beneficial service to take a loan with no extra cost, but again, it is important to go through the terms, as sometimes missing a payment can bring in heavy charges and also affect your credit score.
Pros and Cons
Pros of Personal Loan-
- Low interest rate (only with good credit)
- Larger loan amount
- Fixed, predictable EMIs
- Long tenure options
Cons of Personal Loans-
- Longer processing time (unless preapproved)
- Higher processing and pre-payment fees
- Credit score heavily influences approval rate
Pros of Credit Card Loan-
- Instant access to funds
- Paperless
- Short-term flexible EMI plans
- Best alternative for online shopping or ticket purchases
Cons of Credit Card Loans-
- Higher interest rate
- Limited loan amount
- Affects your credit utilization ratio
Also read: Can Students Apply for Personal Loans? A Real Story from Today’s Youth
How to Choose the Right One for You?
- Assess the loan amount: If the money requirement is large (1- 2 Lakhs), then a personal loan is recommended, as a credit card is suitable for smaller loans.
- Review your credit score: A good credit score above 750 is considered good, and could get you a loan at a lower interest rate, but is more beneficial in case of a personal loan.
- Compare the total costs: Sum up the total expenses you will incur with both alternatives. Make sure to not just take the interest rate but also processing fees, GST, prepayment penalties, and any hidden charges.
- Repayment Flexibility: Personal loans offer fixed EMIs and prepayment tenure; on the other hand, credit card loans can be more flexible but risky if mismanaged.
- Review special offers: Banks sometimes offer limited-period deals on credit card EMIs that can be beneficial. This can be checked on the application or the internet banking dashboard.
The Bottom Line
In 2025, both personal and credit card loans will be accessible very easily, and they will be flexible and tailored to fit various financial needs. In the end, the choices depend on the loan size, repayment capacity, and urgency. A personal loan can be chosen if the required loan amount is large and you want stable EMI payments over a longer period. On the other hand, credit card loans are beneficial when you need instant, small-scale funding, or there are attractive EMI deals available on the card. Whatever option is chosen, make sure to always borrow responsibly, stay within your budget, and make timely repayments to maintain a healthy credit score.
Written by Adithya Menon
