Explore your Financial Options

In our day-to-day lives we don't really pay much attention to our short-term financial needs, this is because we don't evaluate our requirement in terms of available products, the costs and benefit attached in the same. Try and answer the below given questions:

• Why do I need the credit?
• How long I need the credit for?
• Which product is apt for my financial need?
• When will I be able to payback the credit?
• What are the costs involved in various credit options?
• What is the application process?

There are two financial products, which can meet short-term financial requirement:
Credit card
Personal Loan.

But how do you decide what is your real requirement? Let's analyze different scenarios and then find out which one to choose!

Credit card is the most flexible form of short-term borrowings with easy repayment options. Credit Card is needed mainly used under following scenarios:

When you want to avail interest free credit period for your purchases.
When you want to shop and do not want to carry cash.
To avail reward points / other discount offers.
There may be case that you have a recurring short-term financial requirement.

Your credit card can really extend your spending power, when used smartly and wisely. Holding a credit card is really beneficial and moreover it has become a requirement in this modern era. Credit Card is a necessity; if you don't have one, apply now!

Here are some helpful tips that will help you take the best advantage of your card. But if you are unable to take the best out of your card, then this is the time to rethink about the idea of taking another credit card?

Let's answer the following questions and know what your real requirement is:
a. Is this your second / third / fourth / fifth credit card? b. Are you regularly paying only the minimum amount due on your current credit card? c. Do you feel the need for an increase in your credit limit on your current credit card? d. Do you already have a loan or an emi repayment plan running on your current credit card?

For all those who say YES to above given questions, their actual need is of a personal loan NOT a credit card because usage of credit card in this manner has certain constraints attached to it.

So now lets find out what are the circumstances under which we should go for a personal loan.
1)You are going through a cash crunch.
2) Need more cash for your day-to-day activities.
3) Need Cash to pay your credit card dues.
4) Require ready cash at lower Rate of interest.
5) You want to distribute your one time heavy expenditure into easy EMIs.
If your requirements match as stated, then apply for personal loan now!!

Personal Loan (a need based loan) is a simple answer, which will helps you in availing quick cash and that too on easy terms. It is an unsecured loan not backed by collateral, often used over a short-term basis to cover unexpected expenses like emergency medical expenses, travel expenses or to pay bills on time, to pay your credit dues as well. Read more about personal loan, and understand the product more.

The table given below will give you a clear understanding that how these two products are different.

Point of Difference	PERSONAL LOAN	Credit Card
Meaning	Personal Loan is a need based Loan for a given end use. Like for purchase of consumer durables, travel, paying you credit card dues etc.	Credit card is the most flexible form of short-term borrowings with easy repayment options
End use of credit	It is taken for a given end use like marriage, emergency etc	Credit card is more or less a necessity. It is taken basically for shopping and availing discounts and also to earn reward points
Rate of interest	13 to 40%	30-40%
Documentation	Less documentation Identity proof Residence proof Proof of age Latest salary slip.	Documents required Identity proof Latest Salary slip
Turn Around Time	It takes 2-3days by the bank to disburse a Personal loan	Higher Turn Around Time of 10-15days.
Terms & Conditions	Negotiable terms Like Processing fees	Stringent terms & Conditions (All the charges on the credit card are as per the pre decided banks policy.)
Other Charges	Pre-Closure Charges Documentation Charges Delayed Payment charges Service Tax	Default charges Service tax Late payment charges Processing fees
Acceptance	Money is received in DD which can be converted into cash therefore, easy acceptance	Accepted at all big retail outlets
Record of expenses	In Personal Loan, there is No record of your expenses	Record of expenses is Maintained by the bank in your credit card statement.
Purchasing Power	Enhanced purchasing power up to the amount of loan taken	Enhanced purchasing power till the credit limit and can also avail a credit loan

So the ottom line is to analyze what your actual need is! And according to that decide between a credit card and a personal loan because they are not interchangeable products. The features of both of them have a sea difference, like interest rate charged on credit card (36-40%) is far more than what is charged on personal loan (14-30%), because the two debts have different purposes, perhaps security and risks to the lender.

Like this analyze your every financial need and then reach to a conclusion keeping in mind the cost involved for both the options.