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Why Personal Loan Is Better Than Running a Credit Card Outstanding?

July 23, 2021 - By Elizabeth

Read Time:3 Minute, 40 Second

You might have come across two of the most popular forms of lending, i.e. personal loan and credit cards when it comes to availing financial assistance. Since personal loans are unsecured in nature, one does not have to back it up with collateral. If you require a high loan amount, it is best to opt for a personal loan. The amount you borrow should be enough to meet your loan requirements. It is an essential step to assess your repayment capacity. Also, personal loans have a lower rate of interest compared to credit cards and the EMIs can be easily repaid over a short period. To get an estimate of your monthly repayment, you can take the help of an online EMI calculator and calculate your personal loan EMIs.

Table of Contents

When To Use A Credit Card Loan?

When you want to make a small purchase within your credit limit.
When you want to make an in-store or online transaction.
When you are unable to meet the personal loan eligibility criteria.

When To Use A Personal Loan?

When you require a high loan amount to finance expensive medical treatments or buy a home, pay off debts, etc.
When you need to make payments to a business or a person who does not accept credit cards.
When you plan on making a big-ticket purchase that you want to pay over some time.

What Are The Other Common Uses Of A Personal Loan?

Refinancing credit card debt
Consolidating different types of debts
Financing home renovation expenses
Covering your travel expenses
Financing or refinancing a car
Financing business expenses
Covering wedding expenses

Personal Loan Eligibility Criteria

Given below is the list of basic loan eligibility criteria set by lenders for salaried and self-employed applicants.

For Salaried Individuals

The applicant must be between the ages of 21-60 years.
Indian residents are eligible to avail a personal loan.
To qualify for a personal loan, the employee must be an employee at an MNC, private, or a public limited company with at least two years of work experience.

For Self-Employed Individuals

You must be an Indian resident to be eligible for a personal loan.
The applicant must be between 22-65 years of age.
The applicant should have a business vintage of at least 4 years to qualify for the loan.

Documents Required

The following is the list of basic documents required for a personal loan.

Proof of identity: Aadhaar card, passport, PAN card, driving license, etc.
Proof of address: Driving license, passport, Aadhaar card, etc.
Salaried applicants: The applicant’s bank account statements or salary slips for the last 6 months.
Self-employed applicants: Income Tax Returns (ITR) filing for the last 2 years.

Credit Score For Personal Loan

Having a good credit score is crucial when availing any form of credit. When availing a personal loan, you must have a credit score of 750 and above for smooth loan approval. However, some lenders offer personal loans to borrowers with a lower credit score, but the interest rates rise as your score goes down. Keep in mind that the interest rates applicable on a personal loan are different for every lender, so you might just get a better rate with the same credit score.

Making timely loan EMI repayment can help improve your credit score. A personal loan adds to the variety of your credit mix, which is one of the major factors in your credit score. If you pay off your credit card debts with the help of a personal loan, you will be able to lower your credit utilization ratio.

Before you apply for a personal loan, compare your options and choose a lender that can offer you a better deal based on your requirements. At Finserv MARKETS, you can avail a Bajaj Finserv Personal Loan amount of up to Rs. 25 lakh. The rate of interest on a personal loan is as low as 12% per annum.

Moreover, it offers a flexible loan repayment tenure that usually ranges from 1 to 5 years, allowing you to choose your tenure and repay the loan amount effortlessly. By applying for a personal loan with the Finserv MARKETS app online, you can get access to value-added services like a free CIBIL score check and Financial Health Check Report (FCHR) online. The financial report will help you understand your finances and help improve your overall credit health.