As a credit card user requiring urgent funds, there are two primary loan options that come to mind-personal loan and a credit card loan. Since both give quick money disbursal and do not restrict usage of loan funds, here is how to compare and choose between the two.
Loan eligibility
When deciding whether or not to make a personal loan, creditors take into consideration a borrower’s credit score, monthly income, work and employer profile, and other factors. For a loan on sbi credit card, however, the card issuer decides which cardholders are eligible for a pre-approved loan. This decision is made mostly on the basis of the card type, spending pattern, and bill payback history of the cardholder. To obtain a loan against a credit card from the card issuer, borrowers are required to have an existing relationship as a credit card user; however, there is no requirement for borrowers to have an existing relationship with the lender in order to apply for a personal loan.
The rate of interest
The per annum sbi personal loan interest rate can range anywhere from 9 percent to 24 percent, depending on the lender as well as the borrower’s credit history and score. When it comes to loan on sbi credit card, the interest rates charged are typically roughly one percent more than those charged for personal loans. Therefore, it would be wise to go the route of a personal loan if you are able to wait for the loan disbursement for a week or so at the very most.
The processing time and associated fees
When compared to other types of credit facilities, a loan secured by a credit card often has one of the quickest processing times. The money can be withdrawn from the account within a matter of hours after the loan is applied for. Due to the fact that the loan on sbi credit card is pre-approved, existing cardholders who meet the eligibility requirements might avoid the requirement that they submit physical proof. Some card issuers also promise that the funds for these loans be disbursed instantly. A user of a credit card needs just file an online application either through internet banking or by contacting customer care support in order to avail themselves of the loan, provided that they are eligible. The processing fees that are associated with credit card loans might amount to as much as 2.5 percent of the loan amount.
When it comes to personal loans, applicants are expected to submit documents in order for their loan application to be approved. These documents include pay slips, ITR forms, and KYC paperwork. Because the process of document verification takes some time, personal loans are typically disbursed within two to seven days of the loan application being submitted. The processing fees involved can go up to three percent of the loan amount; however, many lenders waive these fees during holiday seasons or as part of limited-time offers.
Maximum sanction amount
Instead of only focusing on SBI personal loan interest rate, also factor in the loan amount before finalizing the option. The maximum amount that can be borrowed using a credit card as collateral is defined by the card issuer and is known as the loan limit. Although the card user’s credit limit is temporarily blocked up to the amount of the loan that has been approved, which may have a negative impact on his or her ability to make purchases with that card, the limit will eventually be released if the borrower continues to make payments toward the loan’s EMIs. Even beyond the credit limit that is available on the card, some credit card issuers have started extending loans to cardholders in the form of credit cards.
On the other hand, the sum of a personal loan typically falls between 50,000 and 20 lakh, while some lenders assert that they may grant even larger loan amounts, reaching up to a maximum of 40,000 lakh rupees. Keep in mind that the amount of the personal loan that is actually approved will, in the case of a personal loan, primarily depend on characteristics such as the borrower’s capacity for repayment and the chosen loan length.
Loan payback tenure
The typical repayment period for a personal loan is between one and five years; however, some creditors will extend the maximum repayment period for a personal loan all the way up to seven years. On the other hand, the payback tenure for a loan on sbi credit card can range anywhere from six months to five years on average. If the borrower plans to pay off the loan within a year’s time, they should choose the credit card loan choice if they are deciding between these two different loan options. When choosing the duration of a loan, one should be careful not to jeopardise their ability to make contributions toward important financial goals. Although a shorter loan term will result in lower overall interest costs for the borrower, this also means that the borrower will have to pay a higher monthly installment amount.
Fees for prepayments
Depending on the lender, prepayment fees on personal loans might go as high as 5 percent of the loan’s original balance. However, banks, especially the PSU ones, do not punish prepayment as their personal loans are often issued at flexible rates. Keep in mind that prepayment fees on retail loans with variable sbi personal loan interest rate cannot be charged by banks in accordance with the recommendations issued by the RBI.
When taking out a loan using a credit card as collateral, credit card issuers will often levy prepayment fees of up to three percent of the total amount of the loan that is still outstanding. Because prepayment fees can eat up a sizeable portion of the overall interest savings generated upon making the prepayment, it is imperative that before deciding on the type of loan and the lender you compare prepayment fees in addition to other essential parameters such as sbi personal loan interest rate, tenure, loan amount, processing fees, and so on.