Loan against credit card vs. personal loan - What should you choose? 6 key factors to consider

When you want to raise a personal loan, you may have an option to raise it against a credit card rather than opting for a conventional personal loan. However, one must make a wise choice between the two options.

Before you jump the gun, make sure that you consider all the key factors. These include whether there is a pre-approved loan, the rate of interest charged by the bank , total amount required and your current credit score.  

Loan against card or personal loan: Key factors

1. Pre-approved loan: First of all, you should consider whether the loan is pre-approved or one has to opt for it. Typically, loan against credit card is a pre-approved one and conversely, a regular personal loan has to be applied for. Therefore, you choose the option that suits you the most.

2. Rate of interest: Another important factor that one must consider is the rate of interest. Generally, loan against credit card carries a higher rate of interest. On the other hand, a regular personal loan carries a relatively lower interest rate.

3. Blend of two options: When an applicant already has a pre-approved offer and does not want to let go of it, he can first avail the offer at hand. If the fund requirement is still there, s/he can then apply for a regular personal loan for the top-up.

4. Usage against the credit limit: Once you take out a loan against your credit card, the limit of your credit card gets blocked. If you are set to use your card in the near future, you should be careful of availing this option, and instead can opt for a regular personal loan.

5. Requirement of loan: Sometimes the loan that you need is far more than what is being offered by the bank against your credit card. In that case, it is futile to take it. Instead one can simply take a regular personal loan.

6. Credit score: One key factor that you should also consider is the credit score. If your credit score is very high, then it is easy to raise a personal loan at a lower interest rate. 

On the other hand, when your credit score is lower than 700 – then the interest rate offer that you will receive will not be much different from what is being offered against a credit card..