Line of credit vs credit card vs short term loans: which one should you go for?


People today have many options such as credit cards, lines of credit, and short term loans to meet fixed monthly expenses.

The coronavirus outbreak has left people in dire straits due to job losses, pay cuts and business closures. As this resulted in irregular income, industry experts claim that it increased the demand for monetary support to cover the monthly income gap. However, people today have many options such as credit cards, lines of credit, and short term loans to meet fixed monthly expenses.

The three options carry different risks and costs. Therefore, experts say one should evaluate before making a choice.

Raghuvir Gakhar, CEO of PC Financial, a digital financial services platform, says: “With a short-term loan, you can budget all expenses well in advance, but it’s not the same with a credit card. credit or line of credit where expenses may be higher. or lower depending on use. Even the interest rate is much lower in the case of loans.

Getting a credit card requires a good credit score, annual fees, and a high penalty if payment is delayed. On top of that, there is an inherent risk of overspending, card loss, abuse, and a long list of terms and conditions. In addition, it takes money immediately and having applied for the credit card, it will take at least a month to reach it.

However, says Gakhar, “It’s not so easy for those who don’t have enough credit. For them, fintech platforms have made it easier to secure credit with the possibilities of meaningful borrowing options to meet urgent financial needs, regardless of the client’s position in the credit spectrum. “

He further adds: “With options such as lines of credit which are like unsecured loans, individuals can borrow in a range as low as Rs 2,000 to Rs 5 lakh.”

Some companies also offer innovative solutions such as paying online on a merchant site or even scanning and paying on any UPI barcode. This allows anyone to have a digital credit card-like experience. Unline a loan, one can use the given credit loan over and over again in the given period of time.

Finally, unsecured short term loans are available for new credit borrowers with a minimum of KYC. Unline credit card, one can receive short term loans within 10-15 minutes.

Gakhar says, “Another advantage is that these are unsecured loans, which are not backed by collateral given by the borrower. Short term loans are suitable for financing large purchases, consolidating credit card debt or any other personal payment that cannot be made immediately with the given income.

In short, experts say that the borrower should consider all of these factors before making a decision. All options have their pros and cons, but as a borrower you need to decide what the requirement is based on your needs and make an informed decision.

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