What does one do if an emergency strikes while you are not in the pink of your health? Among several options, one could take out a personal loan. As personal loan has widened its net in its offerings and options — there are now a slew of sub-categories within its umbrella. These include instant loans and loans against credit cards.
It is worth noting that while both these loans are disbursed instantly, there are a few dissimilarities between the two at the same time.
Here we list out the key differences between these two forms of loans.
Instant loan vs loan against credit card
I. Interest rate: While instant loan, being a typical personal loan, is given at a higher rate of interest, loan against credit card is generally given at a slightly lower rate.
However, there are a number of factors which determine the interest rate such as overall creditworthiness indicated by credit score, monthly income, existing debt, among others.
II. Credit limit: When instant loan is taken, it does not lead to decline in the credit limit, whereas when loan is taken against credit card, the credit limit of credit card reduces proportionately. This, effectively, means that your credit score can have an adverse impact if your credit utilisation is higher as a result of this loan.
III. Ease of fund raising: Generally both are easy to secure. Be it a loan against credit card or an instant loan, one does not need to submit any documents. However, there could be minimal documentation in case of instant loan.
IV. Time to process: An instant loan processing may take a few minutes to 24 hours so long as the documents are in place. On the other hand, loans against credit cards are processed instantly and the money is credited directly to the bank account of the borrower.
V. Target audience: Instant loan is usually meant for the people who require a high-value loan with flexible tenure whereas loan against credit card is disbursed to the applicants who hold credit cards and need a short-term loan without having to apply for a separate personal loan.
(Note: Raising a loan comes with its own risks. So, due caution is advised)
