Personal Loan, Credit Card or BNPL- Which Is the Better Option to Go For?

People nowadays prefer to take out micro-loans to cover minor expenses. Whether it is shopping, travelling, or purchasing trending gadgets, direct spending from the wallet is gradually being replaced by products such as BNPL, credit cards, and personal loans. The question now is which of them is ideal and easily accessible. Let us find out.

What are Personal Loans?

A personal loan is a debt product that is unsecured in nature. You can use it for various purposes, such as consolidating debt, paying for a vacation, or making a large purchase. The loan must be repaid in fixed monthly payments over a set period. To apply for a personal loan, provide information about your income, age, total work experience, and occupation status. The lender approves funds if your details meet their minimum qualifying conditions. They decide the interest rate based on the risk associated with your profile. 

What are the Features of a Personal Loan?

• Collateral free

  You can get funding without putting up any asset as security. 

• Flexible tenure

  Instead of worrying about monthly obligations due to short repayment tenure or interest burden because of longer tenure, you can use an EMI calculator and pick the payback period that suits your pocket the most. The minimum and maximum terms are 12 months and 60 months, respectively.

• Flexible use

  You are free to use the loan money for any legitimate purpose.

• Quick application

  With the advancement of technology, you can submit your application via a web-based portal or digital lending app.

Also Read: Instant Cash Loan Vs Credit Card: Which is the better option

What are Credit Cards?

A credit card is a revolving debt product that allows you to borrow funds up to a predetermined limit in order to make purchases or withdraw cash. Financial institutions issue this plastic card to individuals with a good credit profile.  Once the card is issued, you are required to make monthly payments on any outstanding balances, along with interest charges (if applicable). 
 
The majority of credit card companies provide zero liability protection. It means that if you misplace the card and notify the appropriate authority, any unauthorised transactions made between the reporting and blocking periods are not your liability.

What Are the Features of Credit Cards?

• Zero interest

  A credit card does not charge interest. Only if you fail to pay your bill on or before the due date you will be charged with an interest penalty. 

• Rewards

  There are certain credit card transaction levels that you must reach to receive reward points. For example, you may have seen offers like fueling your vehicle with XYZ amount of petrol and getting a 5% discount. Many card issuers also offer free movie tickets or discount vouchers redeemable at certain restaurants.

• Transaction fees

  Though credit cards do not levy interest, they do charge transaction fees for each swipe at a POS machine.

Also Read: What is the best way to use a credit card?

What is BNPL?

BNPL, or Buy Now Pay Later, allows customers to purchase items and pay for them in instalments rather than the total amount upfront. This type of financing is often offered by retailers and can be used to buy a wide range of products, including clothing, electronics, and home goods. Many companies provide BNPL options through partnerships with third-party providers.
 
When you intend to use BNPL, you can complete your purchase by providing your contact and billing information and then paying a small down payment or deposit. The remaining balance is then split into multiple payments that are typically due at regular intervals. These payments can be automatically charged to the customer's credit or debit card. You may also pay manually through the BNPL provider's website or mobile app.

BNPL Vs Credit Card Vs Personal Loan

Particulars	BNPL	Credit Card	Personal Loan
Loan Amount	They are a microloan solution that facilitates purchasing or making reservations.	The credit limit is usually lower.	They offer funds in the range of Rs 50,000 to Rs 5,00,000.
Repayment Tenure	14-90 days	25-30 days	12-60 months
Interest Rate	No cost EMI	If your bills are paid on time, there will be no interest; otherwise, you will have to pay 2-3% interest.	The interest rate is decided by your lender.
Annual Charges	Not applicable	Applicable	Not applicable
Usage Flexibility	You can use it for a specific purpose.	You can use it for any purpose.	You can use it for any purpose.
Credit history	Not required	Mandatory	Mandatory

What to Choose Between a Credit Card and a Personal Loan?

Among all the available options, a personal loan is the best choice. Even though you must pay interest here, you cannot ignore the benefits it provides in the form of a flexible repayment period and unrestricted use of funds. On the other hand, Credit cards and BNPL are available for a small amount with a shorter repayment period.

Final Words

Personal loans can help you sail through any monetary crisis. This loan product can help you if you have multiple high-interest debts or are dealing with a medical crisis. But, credit cards and BNPL schemes are best suited for small purchases, such as shopping, travel booking, and gadget purchases. You may earn reward points or other offers on these but you must repay the debt within a short period.