Personal Loan vs Credit Card EMI — Which is Cheaper?
Detailed cost comparison of personal loans vs credit card EMI conversion. Understand interest rates, processing fees, and which saves more.
Interest Rate Comparison
| Type | Interest Rate | Effective Annual Rate |
|---|---|---|
| Personal Loan (bank) | 10.5-14% | 10.5-14% |
| Personal Loan (NBFC) | 14-24% | 14-24% |
| Credit Card EMI | 12-18% (advertised) | 18-24% (effective) |
| Credit Card Revolving | 2-3.5% per month | 24-42% |
Key insight: Credit card EMI rates look lower because they're often quoted as flat rates (not reducing balance). A '15% flat rate' actually equals ~28% reducing balance rate. Always compare reducing balance rates.
When to Choose Personal Loan
✅ Loan amount is ₹1 Lakh+ (economy of scale for processing fees) ✅ You need longer tenure (12-60 months) ✅ Your CIBIL score is 750+ (gets you 10.5-12% rate) ✅ You can get a pre-approved offer from your bank ✅ You want a clear repayment schedule
Personal loans offer genuine reducing balance EMI at transparent rates. For amounts above ₹2L, they're almost always cheaper than credit card EMI.
When to Choose Credit Card EMI
✅ Purchase amount is ₹10,000-₹1,00,000 ✅ No-cost EMI is available (merchant absorbs interest) ✅ Tenure is short (3-6 months) ✅ You want instant conversion without loan application ✅ The credit card offers 0% EMI with subvention
No-cost EMI is genuinely free when the merchant provides interest subsidy. Check if the product price is the same for cash vs EMI — if it's the same, the no-cost EMI is real.
Cost Comparison — ₹2 Lakh for 12 Months
| Factor | Personal Loan | Credit Card EMI |
|---|---|---|
| Interest rate | 12% (reducing) | 15% (flat) ≈ 28% reducing |
| EMI | ₹17,770 | ₹19,167 |
| Total interest | ₹13,240 | ₹30,000 |
| Processing fee | ₹2,000-4,000 | ₹0-1,000 |
| **Total cost** | **₹15,240-₹17,240** | **₹30,000-₹31,000** |
| Savings | **₹13,760-₹15,760 cheaper** | — |
For ₹2L over 12 months, personal loan saves nearly ₹14,000. The gap increases with amount and tenure.
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