| Overview: This guide compares personal loans and credit cards for festive season spending in India. We’ll examine interest rates, repayment flexibility, loan amounts, and eligibility requirements to help you make an informed choice. You’ll learn which option suits different types of festive purchases, common mistakes to avoid, and practical tips to manage your finances during celebrations. |
Understanding Festive Season Financing Needs
The festive season in India brings joy, celebrations, and, often, increased expenses. According to recent RBI data, consumer spending during Diwali and other festivals rises by approximately 20-30% compared to regular months.
When your savings fall short, you typically face two popular financing options: taking a personal loan or using a credit card. The personal loan vs credit card decision isn’t straightforward. Each has distinct advantages depending on your specific needs, spending habits, and financial discipline.
Key Differences: Personal Loan vs Credit Card
When comparing personal loan vs credit card options, several fundamental differences emerge:
| Feature | Personal loan | Credit card |
| Nature | One-time lump sum amount | Revolving credit facility |
| Interest rates | 10.75% to 22% per annum | 18% to 24% per annum |
| Repayment | Fixed EMIs over the set tenure | Flexible minimum payments |
| Loan amount | Higher (up to ₹25 lakh) | Limited by credit limit |
| Processing time | 1–3 days typically | Instantly once approved |
| Best for | Large planned expenses | Smaller, frequent purchases |
Interest Rate Comparison
The interest rate is perhaps the most significant factor when evaluating personal loan vs credit card financing. Personal loans typically offer lower interest rates, starting from around 10.75% and going up to 22% annually, depending on your credit score and income.
Credit cards, on the other hand, charge considerably higher interest—often between 18% and 24% per annum—if you don’t clear your outstanding balance by the due date. What’s more, this interest compounds daily from the transaction date if not paid in full, potentially creating a debt trap.
Repayment Flexibility
With personal loans, you commit to fixed monthly EMIs throughout the loan tenure. This predictability helps in budgeting but offers less flexibility.
Credit cards allow minimum payments (typically 5% of the outstanding amount), giving you breathing room during cash crunches. However, this convenience comes at a cost. Paying only the minimum amount means you continue accruing interest on the remaining balance.
When to Choose a Personal Loan for Festive Expenses
There are specific instances when a personal loan is the correct choice.
For Large, Planned Purchases
Personal loans are ideal for substantial, planned festive expenses like:
- Home renovations before Diwali
- Big-ticket electronics or appliances
- Wedding expenses during the festive season
- Travel plans for extended festival holidays
For Better Interest Rates
If you’re planning to spend a significant amount, the lower interest rate of a personal loan can save you considerably compared to a credit card.
| Pro Tip: Check for festive season offers on personal loan interest rates. Many lenders, including Airtel Finance, offer special rates during festivals, sometimes as low as 10.75% for customers with excellent credit scores. |
When You Need a Higher Amount
Festival renovations or major purchases often require more funds than your credit card limit allows. Personal loans can provide amounts up to ₹25 lakh based on your eligibility criteria, making them suitable for more substantial expenses.
For Debt Consolidation
If you already have multiple high-interest debts, including credit card dues, taking a lower-interest personal loan to consolidate them can be a smart festive season financial move.
When to Choose a Credit Card for Festive Expenses
However, sometimes a credit card is the correct choice.
For Smaller, Frequent Purchases
Credit cards shine when it comes to multiple smaller purchases spread across the festive season:
- Daily shopping for decorations
- Gift purchases for family and friends
- Dining out during celebrations
- Online shopping during festive sales
For Short-Term Financing
If you can repay your festive purchases within the interest-free period (typically 45–50 days), a credit card becomes essentially an interest-free short-term loan.
| Customer Story: Rahul used his credit card for all Diwali shopping worth ₹45,000. By paying the full amount by the due date, he effectively got a 45-day interest-free loan while also earning 900 reward points that he later redeemed for a discount on his next purchase. |
For Rewards and Cashbacks
The festive season often brings enhanced rewards on credit card spending:
- Cashback offers (sometimes up to 10% during special promotions)
- Accelerated reward points on specific categories
- Discounts on partner merchant platforms
- Special EMI offers on select products
For Emergency Expenses
Unexpected festive expenses can arise anytime. Having a credit card provides instant access to funds without waiting for loan approvals.
Smart Strategies for Festive Season Financing
Here are some smart strategies to manage your money:
Combining Both Options Strategically
The personal loan vs credit card decision doesn’t have to be either/or. Consider this strategic approach:
- Use a personal loan for major planned expenses (home renovation, big appliances).
- Utilize your credit card for smaller purchases, paying the full amount by the due date.
- Take advantage of special festive EMI offers on credit cards for medium-sized purchases.
- Keep some credit limit free for emergencies or unexpected expenses.
Maintaining Your Credit Health
Festive spending shouldn’t damage your long-term financial health. Keep these points in mind:
- Keep credit card utilization below 30% of your limit.
- Never miss EMI or credit card payments.
- Avoid applying for multiple credit products simultaneously.
- Check your credit score before and after the festive season.
You can easily check your credit score through the Airtel Thanks App to monitor your credit health.
In a Nutshell
When deciding between personal loan vs credit card for festive expenses, consider your specific needs, purchase amount, repayment capacity, and financial discipline.
For a hassle-free festive season, consider exploring instant personal loan options through Airtel Finance, where you can get approvals quickly with minimal documents and competitive interest rates.
FAQs
1. Can I get a personal loan with a low credit score during the festive season?
Yes, but expect higher interest rates. Some lenders offer personal loans to customers with scores above 650, though the best rates are reserved for scores above 750.
2. How does the interest-free period work on credit cards for festive purchases?
The interest-free period (typically 45-50 days) applies only if you pay your entire outstanding balance by the due date. Partial payments will incur interest on the remaining amount.
3. Is it better to convert credit card purchases to EMIs during festivals?
Converting large credit card purchases to EMIs lowers the interest rate (typically 12-15%) compared to revolving credit (18-24%), making it a better option for expensive festive buys you can’t repay immediately.
4. How quickly can I get a personal loan approved for urgent festive needs?
With digital lenders and fintech companies, personal loans can be approved within hours and disbursed within 24–48 hours, especially if your credit profile is strong and documents are in order.
5. Will taking a personal loan during the festive season affect my credit score?
Initially, your score might drop slightly due to the hard inquiry, but timely EMI payments will gradually improve your score. The personal loan vs credit card impact on credit score depends on your repayment behavior.
