Personal loans vs credit cards: How to choose between the two?

livemint.com:

debt consolidation, but each option comes with its advantages and disadvantages. There are certainly advantages to using a personal loan for debt management. Firstly, these loans often come with lower interest rates compared to credit cards.

Additionally, they offer fixed monthly payments and a set payoff date, helping you maintain discipline and avoid accumulating more debt. Individuals applying for personal loans typically need a good credit history to qualify, may encounter origination fees, and cannot be used for new purchases as with a credit card. Credit cards often come with lower introductory interest rates for a limited period, which can be convenient if you already have a credit card.

These cards usually include a balance transfer fee and may have a high interest rate after the introductory period. There’s also the temptation to continue using the card and accumulate more debt. A personal loan is an unsecured loan that is deposited directly into your account and must be repaid with interest over a set period.

Unlike revolving credit, such as credit cards, a personal loan concludes once the loan is fully repaid. These loans are unsecured, meaning you don’t need to provide collateral such as a car or house in the event of loan default. Upon approval, you usually receive the loan amount as a single lumpsum deposited into your bank account.

You then repay the loan with interest over a set period, typically ranging from two to seven years. The interest rate is based on your creditworthiness. Many lenders outline the eligibility criteria required for loan approval on their websites.