Personal loans are a concept that probably are known to most people, irrespective of whether they have taken it someday or not.
But what about credit card loans, which have become increasingly popular as an alternative to personal loans in recent years? Users of credit cards who are eligible for both personal loans and credit card loans may thus often find it difficult to make a choice between the two types of loans.
If you too are confused regarding which loan to apply for, personal loan or credit card loan, then do not worry. You can decide which loan option is better for you by comparing the two in the comparison that follows. This will help to arrive at the right decision and then apply for the suitable loan.
Loan qualification
Lenders take into account a wide array of yes bank personal loan eligibility criterion like borrower’s credit history, monthly income, employment history, and other variables before deciding whether or not to grant a personal loan. Following the application, you can check yes bank loan status on the website or mobile app.
The credit card issuer chooses which cardholders are qualified for a pre-approved loan when a loan is secured by a credit card. The type of card, the cardholder’s purchasing habits, and their history of bill payments all play a major role in this choice. Borrowers need not have had a prior relationship with the lender in order to be approved for a personal loan, but they must already have a credit card in order to borrow money from the card issuer with it.
The applicable rate of interest
Depending on the lender and the borrower’s credit history and score after factoring in yes bank personal loan eligibility criterion, personal loan interest rates could range from 10-12% to 24-26%. Typically, interest rates on credit card loans secured by debt are 1% more than those on personal loans. Therefore, if you can just wait a week for the loan disbursement, you should choose a personal loan.
The cost and time required for processing
A loan secured by a credit card often has one of the quickest processing times when compared to other types of credit facilities. The money could be taken out of the account shortly after completing a loan application. Credit card loans are already pre-approved, so current cardholders who meet the requirements can avoid having to present physical documentation.
Additionally, certain card issuers guarantee that the money for these loans will be released immediately. If qualified, a credit card holder can apply for the loan by calling customer service or submitting an online form using internet banking. Processing charges for credit card loans could reach 1-2.5 percent of the total loan amount.
The borrower must present pay slips, Individual Tax Returns, and other identification and financial documents to prove their identity and yes bank personal loan eligibility can be given. Personal loans are often granted within two to seven days of the loan application being received due to the drawn-out document verification procedure. Checking the yes bank loan status of your application online will allow you to follow its progress. The processing fees can run as high as 3% of the loan amount, but many lenders waive these around the holidays or as part of special promotions.
The loan’s amount
The loan limit, set by the card issuer, establishes the maximum amount that may be borrowed using a credit card as collateral. The amount of the approved loan acts as a temporary cap on the cardholder’s credit limit, which may limit their capacity to make purchases. However, if the borrower continues to make the required monthly EMI payments, the credit limit will eventually be recovered. Some credit card companies have begun providing consumers with loans in the form of credit cards even after the card’s credit limit has been reached.
A personal loan normally has loan amount range between Rs 50,000 and 20-25 lakh. Some lenders claim that they can even give loans up to Rs 25-40 lakh depending on yes bank personal loan eligibility of borrower. Keep in mind that a variety of factors, such as the borrower’s ability to repay the loan and the term selected, affect the amount of the personal loan that is actually granted.
Timeframe for loan repayment
While most lenders would extend the maximum payback duration up to seven years, the typical repayment period for a personal loan is between one and five years. Just as you may use an online emi calculator to determine the correct emi by selecting the appropriate term, keep in mind that you can use a yes bank loan status tool to keep track of the status of your application.
However, the term of a credit card loan could be anywhere between six months and five years.
Payments in advance (prepayment)
Personal loan prepayment penalties could be as much as 5-6% of the total borrowed amount, depending on the lender. However, banks, particularly those in the public sector, do not apply prepayment penalties because personal loans from banks are typically offered at variable personal loan interest rates. Keep in mind that, in accordance with the RBI’s recommendations, prepayment fees cannot be imposed on retail loans with variable interest rates.
Also, don’t forget to check the yes bank loan status after applying so that you won’t have to worry about whether your application was accepted or rejected.
Credit card issuers frequently charge prepayment fees of up to 3% of the total amount of the loan that is still owing when credit cards are used as collateral for loans. Prepayment fees must be considered alongside other crucial factors, such as personal loan interest rates, tenure, loan size, processing fees, and so forth, before choosing the type of loan and the lender because they can consume a significant portion of the overall interest savings realized through prepayment. This is because prepayment penalties that are irrevocable are a possibility.
