What do you do when you have a requirement of immediate funds or credit and you do not have sufficient funds? Either you may choose the option to swipe your credit card or go with the traditional way to opt for a personal loan in UAE, depending on your financial requirement. Well, credit cards are ideal for small or short-term expenses, a personal loan is ideal for big amount spends. So, the decision to go either for a credit card or personal loan solely depends on the emergency and the kind of financial requirement you have and the duration within which you’ll be able to repay the amount.
However, to make a choice between these two, it is very important to draw a comparison based on your financial requirements and situation. As both of them has their own set of advantages & disadvantages.
This article includes details on how personal loans and credit cards work, along with the tips to choosing the best option for your need. So, keep on reading to make the right decision.
How Does Personal Loan Work?
A personal loan is an unsecured loan that is best utilized for long-term financing. It is usually taken to fulfill various personal needs ranging from higher education too expensive purchases or even debt consolidation. There is no restriction on what you can do with a personal loan. You can use it for any of the reason as per your need which makes it a convenient option for many of the people. Your credit score plays a vital role when it comes to opting for a personal loan in UAE. The better your credit score, the lower the interest will be charged on a personal loan.
The big difference with a personal loan is that you’re provided a lump sum amount instead of a credit card to make purchases. One of the major benefits of opting for a personal loan is that you can repay the loan amount through equated monthly installments as per your ease.
Benefits of Personal Loan:
There are plenty of benefits to choosing a personal loan. Some of them are as follows:
- One of the great benefits of personal loan is that you can easily apply for a personal loan online as well as offline with the utmost ease.
- A personal loan is indeed the best option for consolidating debts if you can avail a personal loan at the lowest interest rate.
- Since personal loans are unsecured, you don’t need to provide any collateral or guarantor in order to avail them.
- You can easily improve your credit score through the use of the personal loan in UAE.
- Personal loan interest rate in the UAE is usually low.
- Last but not least, you can avail a personal loan to meet your various personal needs. Be it- home renovation, higher education, wedding, vacation, medical emergencies as you can use a personal loan for any purpose.
Drawbacks of Personal Loan
- You will usually need a good credit score in order to qualify for a personal loan in UAE.
- You’ll have a fixed payment schedule to adhere to.
How Does Credit Card Work?
A credit card comes as a pre-approved loan and it is given up to the maximum limit of a credit card. Credit card is among the expensive forms of financing since it comes with the revolving debt. This financial tool can be utilized to make payments both online and offline as well. The basic rule of using the credit card is how much you spend on your credit card every month and how much you are able to pay back on time. The interest rate charged on credit card is comparatively higher. That is why credit cards are ideal for short-term financing.
Benefits of Credit Card
- You can apply for a credit card at any time and can be used only when you need it.
- You can apply for a credit card online without visiting the bank in person.
- Credit cards in UAE are quite easy to qualify even if you have an average credit score. However, a good credit score is highly appreciated.
- There is no doubt that the credit card comes with plenty of benefits and offers such as air miles, travel rewards, discounts on movie tickets, retail purchases, and much more.
Drawbacks of Credit Card
- Some credit cards come with a high rate of interest.
- Some of the credit cards charge over limit fee, annual fee, late payment fee, and many other fees.
- You may require excellent CIBIL score in order to qualify for a credit card with the low rate of interest as well as the best rewards programs.
- If your credit card’s APR (annual percentage rate) is high, your interest charges can accrue very quickly which can ultimately bury you in debt.
The Final Word
After comparing credit cards & personal loans, you can now make a final choice based on your situation & financial need. And if you have a clear idea about your requirement then it will easier for you to make the right decision.