Personal Loan or Credit Card: What’s Best for Salaried Employee Suffering from Cash Crunch

Posted on 29/12/2018Posted in business finance

With the rising cost of living, different commitments at various stages in your life, you might find yourself in a tricky financial situation. This can be worrying and overwhelming for many. However, there are a number of financial solutions to consider if you are in a financial crisis. Personal Loan for Salaried Employees, Credit Cards, overdraft are some of the options that many banks and financial institutions provide for those facing a cash crunch.

Salaried employees sometimes have to live from paycheck to meet their growing financial demands. From paying bills to purchasing groceries or lifestyle shopping, these expenses leave an individual with very little money for investments and savings. When the payments exceed the income or if there is an unexpected expense such as a medical emergency, a home renovation, there could be a considerable debt that gets piled on. If you find yourself facing such a scenario, it might be a good idea to consider a Personal Loan for salaried employeesor do a Credit Card swipe. Both have their pros and cons,and in this article, we have elaborated both. Read on to find out how to get out of a cash crunch.

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Personal Loan Vs. Credit Cards

A Personal Loan today is very easy to secure provided you have the right documents and meet the eligibility criteria. Personal Loans for salaried employeesare offered by many banks such as ICICI Bank, HDFC Bank, SBI Bank depending on the needs of the individual. Whether it is clearing off debt, purchase of a smartphone or even planning a wedding, Personal Loans are designed keeping in mind the needs of the customer. The biggest benefit of a Personal Loan is a fixed interest rate and equated monthly instalments (EMI).  Money is provided when in need, therefore you can take your time to pay it back slowly.

Credit Cards, on the other hand, provide instant loan however the interest rates on these are very high. While a Credit Card is useful in an extreme emergency, today Personal Loans are a better option as they are always available instantly. Credit Cards also have a limitation when it comes to cash withdrawal and maximum amount whereas in a Personal Loan you can decide the total loan amount and avail it in full at the very beginning.

A Credit Card can be an expensive solution for those already facing a cash crunch as the interest rates are much higher than Personal Loans. However, Credit Cards also offer rewards or cash points which can be redeemed at a later date. Credit Cards often have a minimum amount due during a billing cycle and no fixed EMI or grace period. This means that if you only pay back the minimum amount due, the interest will continue to grow on the remaining amount. Credit Cards are on-going loan whereas a Personal Loan has a final date of repayment.

Is Personal Loan better than a Credit Card?

While Credit Cards and Personal Loans both have their benefits, if you are looking for debt consolidation, a Personal Loan is a much better choice as it involves systematic payments and fixed tenures.

In addition to this, you must also consider the following thing:

Why do you require the amount?

If you require a large sum of money immediately, a Personal Loan is a better choice to make, and if you require the amount for a longer period in a continuous fashion, then a Credit Card works.

What is your repayment plan?

If you are facing a financial crunch, chances are you are also trying to figure out how to utilise your salary well. In this case, EMIs which are disciplined and directly get debited from your account for a Personal Loan make sense. ICICI Personal Loan provides many methods of repayment such as Bank Transfer facilities where the money automatically gets deducted from your account.

ICICI Personal Loan, for instance, is available to salaried employees with a maximum loan amount of up to Rs. 30 Lakhs. The entire loan application procedure is online and hassle-free making it one of the most preferred loans amongst customers. The loan tenure can come with flexible payment options for a maximum period of 60 months. ICICI Personal Loan has attractive interest rates ranging from 11.25% to 22%. Once the loan amount is approved it directly gets credited into your account instantly.

If you already understand how to manage your expenses better and do not give into frequent temptations, then a Credit Card is a good idea.

What are the main things to consider while looking at Credit Cards and a Personal Loan?

If you are in a tough spot, it is important to weigh your options carefully before committing. Once you have outlined your issues, make sure to compare interest rates on both Credit Cards and Personal Loans. Another thing to consider is all the prepayment, post-payment charges that will accompany a Credit Card or a Personal Loan.

Lastly, the most important thing to look at is your financial situation. If you are a salaried person who knows how to budget and manage money with discipline, then you can go for a Credit Card. However, if you are looking to clear off your debts and get more structured with your payments, then a Personal Loan is a good choice for you.

It is not always easy to go through a financial crisis with a constant worry over your head. However today, with a multitude of Personal Loan options available to you by many banks it has become easy to address the issues and make the right decision. If you have been contemplating clearing off your debts with a Personal Loan, it is time to make a choice and work towards financial freedom. Make sure to read all the terms and conditions such as loan tenure, interest rates, prepayment charges before you move forward. Having the necessary documents ready to apply for a Personal Loan will urge you on your journey to stress- free living.