In today’s fast-paced world, financial needs often arise unexpectedly—whether it’s buying a new smartphone, funding a wedding, or renovating your home. When short on cash, most people face a common dilemma: Should I take a personal loan or convert my credit card bill into EMIs? Both seem convenient, but the real difference lies in their interest rates, repayment terms, and total cost. Let’s break down which one suits you better.
Personal loans generally come with lower interest rates, ranging between 10% and 15% per annum, depending on your credit score and lender. In comparison, credit card EMI rates can go as high as 18% to 40% per annum.
Here’s why personal loans are considered cost-effective:
Fixed Interest and Tenure: Most personal loans have a fixed rate and tenure (usually 2 to 5 years), making monthly EMIs predictable.
Transparent Repayment Structure: You know your total repayment amount upfront, helping you plan better.
Lower Processing Fees: Compared to credit card EMIs, processing charges for personal loans are often lower.
If your financial need is large and long-term—for example, financing a wedding or home renovation—then a personal loan is typically the more affordable and manageable option.
Credit card EMIs are suitable for short-term and smaller expenses, such as purchasing electronics or covering emergency medical costs. Many banks also offer no-cost or low-cost EMI options during festive seasons or promotional campaigns.
However, before choosing this route, you should consider a few key points:
Hidden Charges: Credit card EMIs often include processing fees, GST, and late payment penalties, which can significantly increase your total cost.
Blocked Credit Limit: Once you convert a purchase to EMI, your credit limit gets blocked for the EMI amount, reducing your available credit for future use.
Impact on Credit Score: Missing even a single EMI payment can hurt your credit score, affecting future loan approvals.
If you are confident that you can repay the amount within 3 to 6 months, and the interest or processing fee is minimal, credit card EMIs can be a convenient option.
Whether you’re opting for a personal loan or credit card EMI, make sure to review these points:
Interest Rate and Total Cost – Don’t just look at the rate; check the annual percentage cost.
Processing and Prepayment Fees – Many lenders charge additional fees if you pre-close your loan early.
Insurance Add-ons – Some banks bundle insurance costs with the loan amount, increasing your EMI.
Repayment Flexibility – Choose a plan that allows partial or full prepayment without heavy penalties.
Choose Personal Loan:
For larger expenses or long-term repayment plans.
When you need lower EMIs and fixed interest rates.
If you want predictable monthly payments and structured financial planning.
Choose Credit Card EMI:
For smaller, short-term expenses (up to 6 months).
If you get a zero-cost or discounted EMI offer.
When you can repay on time without missing any due dates.
In short, personal loans are cheaper and more stable, while credit card EMIs are flexible but costlier if not managed wisely. Evaluate your repayment capacity, total cost, and urgency before making the final choice. A thoughtful decision today can help you save significantly in the long run.
