Instant Cash Loans vs Credit Cards
Which one to choose and why
There has always been this ongoing debate about which credit product to
choose for instant financial needs. As far as unsecured credit is concerned,
credit cards and personal loans are the most widely available options available
in the market today. But individuals often face a dilemma on which product to
choose over the other. In this article, we look at which credit product among
credit cards and personal loans. In recent times, personal loans have
transformed into what they’re now popularly termed as instant cash loans and
While we go about deciding which credit product has the upper hand as far as
preference and affordability are concerned, we evaluate both these forms of
credit by citing some popular parameters.
The Interest Rate – Instant Cash Loans and Credit Cards
Frankly, just by citing this one parameter, a consumer can make the most
appropriate decision, at least as far as the affordability quotient is considered.
Credit cards come with an interest rate (annual) at least 3 times more than
online loans. The interest rates on credit cards is about 40% p.a., and the rate
for instant cash loans starts at about 12% p.a.
Credit cards, however, come with an interest-free period, with each bank
offering its own interest-free period. In most cases, the interest-free period
lasts for about 40 days (differs from one bank to another). The good thing
about an interest-free period on credit cards is that if you’re able to repay the
entire outstanding on your card within this interest-free period, no interest is
charged on your transactions.
As for online loans, there is of course no such thing as an interest-free period.
Instant cash loans come with flexible tenure options ranging from 6 months to
60 months. Longer the tenure you choose (tenures are to be selected on an
annual basis, barring the 6-month tenure), lower the repayments but more the
interest paid. It is vice-versa in the case of shorter tenures.
As for credit cards, consumers are given the option of converting their total
outstanding balance into equated monthly instalments – banks will allow you
to choose a tenure based on your financial convenience.
If you are somebody looking for clarity on what product is better, an instant
loan will give you the option of pre-closure, at a certain fee. Most lenders let
you pre-close your online loan after you’ve completed 6-months or 1-year of
your loan tenure – this of course varies from one lender to another.
As for credit cards, you can close your entire balance at any time you want – no
interest will be charged if you close your balance during the interest-free
period, as already discussed.
If you’re facing an emergency of sorts, applying for an instant loan is a much
better option, as these loans technically reach bank accounts within 48-72
hours. Credit cards, however, take at least 7-10 working days to get dispatched
to your mailing address.
These points will help you make a clear distinction between the two types of
credit – instant cash loans and credit cards.