A credit card is your personal card; it is handy and can be utilized at the very next moment after you realize the need for using it. Although it comes with some annual fees which have to be taken into consideration, it rewards you with points that can be utilized for the subsequent purchases you make, through credit cards.
With most of the cards that come with a benefit of 30-55 days interest-free period, no interest is charged on the purchases if you happen to repay the entire credit amount within the due date of each month.
Just in case you don’t, due to lack of cash flow, you may be penalized with heavy interest rates plus additional fees for withdrawing the money beyond a limit, which in turn would affect your credit score and your chances of getting a bank loan approved!
The credit score is the number that is assigned by the credit reporting agencies to a consumer or cardholder. This score falls between 300 – 900, the higher your score is the better it is for your profile.
If any time in the future you decide to get a loan for purchasing a home or a car then lenders will measure your creditworthiness with your credit score. A credit score is basically a parameter that tells lenders about your ability and responsibility for paying back the loan. Averagely if your credit score is 600+ then you are standing in a good position where your chances to get a loan is quite bright.
Although each lender has its own credit score limits for approving a loan and credit score is just a factor in the whole process.
Talking about the credit score, would it be easy to get a bank loan with a low score? NO!
But it’s the easiest to get an overdraft even if you have the lowest of credit scores since it allows you to borrow an amount irrespective of your bank balance!
You can get an overdraft against your insurance policies, fixed deposits, shares, bonds, properties, and even against your salary, up to three times the monthly payment, although overdraft against your salary would come with a certain minimum and maximum limits and the period for the same differs from bank to bank.
Taking an overdraft against salary is very efficient because it’s fast with less paperwork and bears attractive rates. And any overdraft for that matter is useful because it does not carry any pre-closure charges. It also lets you pay interest for the period and the actual amount you have used.
Before providing an overdraft the lending banks take into consideration your eligibility, creditworthiness along with the collateral you are ready to provide and the fact that you could bear high costs if you slip off the rules that have to be taken care of, after availing of this facility cannot be denied!
A personal loan is taken to meet your personal needs.
It is an unsecured type of loan and is borrowed for a short term, which means it has to be repaid after a period that ranges from 6 – 12 months.
Banks approve the loan amount after evaluating your income, employment history and your ability to repay the loan, and the minimum criterion for the same is a credit score of 750.
A personal loan once approved is payable on a monthly basis for an agreed tenure and may attract charges if you repay the loan amount before this tenure ends. Therefore to know the monthly payment (EMI) one can use the EMI calculators available on the internet with various trusted sources.
After knowing the EMI payable, one also has to understand the processing fees and a few monthly charges that have to be paid every month along with the EMI.
Getting a personal loan, a credit card or an overdraft facility depends on the following factors:-
- Accessibility of these financial products
- Availability of credit out of these products that should meet your financial needs, entirely!
- Affordability in terms of interest fee and the entire cost that has to be borne in order to enjoy any of these products.
- All the calculations to get the best product have to be performed by you for optimum benefit and least cost, depending on your situations. Regular payments will give a timely check on your credit score.