Many people take out cash advances through credit cards whenever they need cash for an emergency. The funny thing here is that if you don’t pay the advance on time, the credit card will charge you up to 45% interest per annum until it is paid off. This is definitely a huge interest that you have to pay at present. Also, if any other expenses remain outstanding, interest is charged at high rate as penalty. And this is why there are different opinions about the disadvantages of this type of financial management since in both cases its interest rate is high. On the other hand, if it is to be said in favor of credit card cash advance, it must have some good points as well, so it is still at the peak of popularity. Some of its beneficial aspects are:
Anyone can withdraw money authorized against the card without any delay at an ATM booth.
One can withdraw up to his/her authorized amount and not more.
No need to go to any bank to get money anywhere during crisis.
The deferred cash repayment schedule is as per the borrower’s choice, not the bank’s schedule.
There is no charge or penalty for prepayment of outstanding amount.
If one repays the amount drawn against the card within the interest-free period, nothing can be better than this.
In favor of personal loans, just because someone who needs urgent money can withdraw money against the card immediately does not mean that the money can be paid back very soon. In the case of credit cards, if one does not pay the money on time, then one has to pay a very high price. However, some of the benefits of personal loans are also highlighted here.
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It is unlikely that one who avails such a benefit during the period will be able to pay it back immediately. In the case of credit cards, if one does not pay on time, the costs are deterrent. But in case of personal loans:
In this case, the repayment period is quite long. So the borrower gets enough time before repayment.
Although the personal loan interest rate is higher than other loans, it is half the penalty interest that is calculated against the outstanding amount of the credit card.
Credit card cash advances have a certain limit on the amount of money being deducted. On the other hand, the personal loan amount is much higher than the credit card loan amount which helps to fulfill the requirements of the borrower.
For example: If a borrower has a balance of Rs.50,000/- on his credit card which he has to repay, he will pay interest at 36% per annum against the card balance. Let us assume who he is. 5,000 can be paid monthly. And if he pays Rs.5000/- every month, it will take him 13 months to pay off the loan completely and at the end he will have to count 10,368/-. But if he plans to take a personal loan at 18% interest then his monthly installment will come to Rs.4,584/-. So if he pays that amount in 12 months then he will have to pay only 5008/- extra at the end of the year which is almost half of the credit card interest. Here it is seen that in both cases the two financial transactions have different advantages and disadvantages. Here you have to decide which one you will choose.
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