A loan and a credit card are two different types of credit products that allow individuals to borrow money, but they work in different ways.
A loan is a financial transaction in which a lender provides funds to a borrower, who agrees to repay the borrowed
amount with interest over time. Loans can be secured or unsecured and can have fixed or variable interest rates. The borrower typically receives the loan amount in a lump sum and makes regular payments, usually monthly, until the loan is fully repaid.
A credit card, on the other hand, is a revolving line of credit that allows the cardholder to borrow money up to a certain credit limit. The cardholder can make purchases or cash advances up to the credit limit and must make monthly payments on the outstanding balance. The interest rate on a credit card can be variable or fixed and is typically higher than the interest rate on a loan.
One key difference between a loan and a credit card is how the borrowed funds are accessed. With a loan, the borrower receives the entire amount of the loan upfront and must repay it over time. With a credit card, the cardholder can access funds as needed, up to the credit limit.
Another difference is the repayment terms. Loans typically have a fixed repayment schedule, with a set number of monthly payments until the loan is fully repaid. Credit card payments are typically based on the outstanding balance and can vary depending on how much the cardholder has borrowed and how much they pay each month.
Overall, loans and credit cards are two different types of credit products that can be used to borrow money. The choice between a loan and a credit card will depend on the borrower's needs, financial situation, and creditworthiness. Loans are generally better for larger purchases with fixed repayment schedules, while credit cards can be useful for smaller, ongoing expenses.
