Personal loan vs credit card EMI which is better
A personal loan is usually cheaper for amounts above about ₹50,000 or for more than 6 months; a credit card EMI is more convenient for a single purchase you can repay within a few months. Both are far cheaper than leaving a balance unpaid on your card.
| Personal loan | Credit card EMI | |
|---|---|---|
| Interest | Usually lower | Usually higher |
| GST | Only on the processing fee | On the interest and the fee |
| Tenure | Up to about 5 years | Usually 3 to 24 months |
| Paperwork | Application, income check | None: converted in the card app |
| Effect on card limit | None | The full amount is blocked until repaid |
| Credit report | A new loan account | Stays within your card |
Personal loan vs credit card interest rate
A credit card EMI usually carries a higher rate than a personal loan, and 18% GST is added to its interest, which makes the gap bigger than the rates suggest. Here is ₹1,00,000 repaid over 12 months, with example rates and fees:
| Option | Monthly payment | Interest | Fee | GST | Total cost |
|---|---|---|---|---|---|
| Personal loan, 12% + 2% fee | ₹8,885 | ₹6,619 | ₹2,000 | ₹360 | ₹8,979 |
| Card EMI, 16% + 1% fee | ₹9,073 | ₹8,877 | ₹1,000 | ₹1,778 | ₹11,655 |
| Left on the card, 3.5% a month | ₹9,073 | ₹36,159 incl. GST | — | — | ₹36,159, over 16 months |
The personal loan saves about ₹2,700 against the card EMI, and about ₹27,000 against revolving the balance. Your actual rates and fees are in each lender's Key Fact Statement; compare two offers on total cost in the Loan Comparison Calculator.
Credit card EMI conversion
Credit card EMI conversion turns a purchase, or your whole bill, into fixed monthly instalments at a set rate, usually through your card's app or website. The purchase amount is taken out of your bill and added back month by month as an EMI.
You can usually convert a purchase within about 30 days of making it, or before the bill's due date. The full amount is blocked from your credit limit and released as you pay each EMI.
Credit card EMI conversion charges
Converting to EMI usually involves:
- Interest on the reducing balance, at a monthly or yearly rate set by the bank
- Processing fee, a flat amount or a percentage of the amount converted
- 18% GST on both the interest and the processing fee, added to each statement
- Foreclosure fee if you close the EMI early, often a percentage of the outstanding amount
The interest rate shown in the app does not include GST or the fee, so work out the total in rupees before you convert.
No cost EMI means
No cost EMI means the seller or brand gives you a discount equal to the bank's interest, so your EMIs add up to the product's price. The bank still charges interest; you just do not pay it from your pocket.
Two costs remain. GST at 18% is charged on the interest, and many banks add a processing fee. On a ₹60,000 phone over 6 months at 15% a year, the interest of about ₹2,652 is discounted, but you still pay about ₹477 in GST on it, plus any fee. The RBI warned banks in 2013 against 'zero per cent' EMI schemes that recover the interest through fees, so check the final amount on the order page. You also give up any cash discount you would have got by paying in full.
Does credit card EMI affect CIBIL score?
Paying credit card EMIs on time does not hurt your CIBIL score, and missing one does. The less obvious effect is on your credit utilisation: the full EMI amount is blocked from your card limit, so a large conversion can push your utilisation above 30–40% of the limit, which can lower your score until it is paid down.
A personal loan works differently. Applying triggers a hard enquiry, and the loan appears as a new account, but it does not touch your card utilisation.
Does credit card EMI affect loan eligibility?
Yes. Lenders count every running EMI, including credit card EMIs, when they work out how much more you can borrow. Most cap all your EMIs at roughly 40–50% of your income, so a large card EMI can reduce the home or car loan you qualify for. Close small card EMIs before applying for a big loan. Check your limit in the Home Loan Eligibility Calculator.
Loan on credit card vs personal loan
A loan on credit card is a pre-approved loan given against your card, often instantly, with no paperwork. Its rate is usually similar to or higher than a personal loan's, and it may block part of your card limit. A personal loan suits larger amounts and longer tenures; a card loan suits small, quick needs.
Avoid a cash advance (withdrawing cash with your card) except in an emergency: banks typically charge a fee of a few per cent plus interest from the day you withdraw, with GST on both. On ₹1 lakh, one month of that can cost around ₹7,000.
Personal loan vs credit card for debt consolidation
To clear unpaid credit card balances, a personal loan is almost always better than carrying them on the card. Card balances cost about 3–3.75% a month (roughly 42–45% a year) plus GST; a personal loan at 11–16% a year costs a fraction of that.
Use the loan to pay every card in full, then stop using the cards for new spending until the loan is repaid. Work out what your current balance costs in the Credit Card Interest Calculator, and the EMI on a consolidation loan in the Personal Loan EMI Calculator.
