Is there a performance hit if we use a loop instead of recursion or vice versa in algorithms where both can serve the same purpose? Eg: Check if the given string is a palind
Recursion is more simple (and thus - more fundamental) than any possible definition of an iteration. You can define a Turing-complete system with only a pair of combinators (yes, even a recursion itself is a derivative notion in such a system). Lambda calculus is an equally powerful fundamental system, featuring recursive functions. But if you want to define an iteration properly, you'd need much more primitives to start with.
As for the code - no, recursive code is in fact much easier to understand and to maintain than a purely iterative one, since most data structures are recursive. Of course, in order to get it right one would need a language with a support for high order functions and closures, at least - to get all the standard combinators and iterators in a neat way. In C++, of course, complicated recursive solutions can look a bit ugly, unless you're a hardcore user of FC++ and alike.