When faced with a large expense—medical bills, electronics, travel, or home repairs—Indian consumers often weigh two popular options: taking a personal loan or converting credit card spending into EMIs.
At first glance, credit card EMIs appear quicker and more convenient, while personal loans seem more formal and time-consuming. However, from a cost, credit score, and long-term financial perspective, the two products are very different.
This article compares personal loans vs credit card EMIs across interest rates, total cost, eligibility, credit score impact, and real-life use cases—so you can decide which option is actually cheaper.
Understanding the Two Products
What Is a Personal Loan?
A personal loan is an unsecured loan where the bank or NBFC disburses a lump sum that you repay through fixed monthly EMIs over a defined tenure.
Approval is typically based on:
- Income stability
- Credit score
- Existing EMIs and FOIR
Banks follow structured underwriting, explained in detail in how banks decide loan eligibility in India. You may click here to check your credit score
What Is Credit Card EMI?
A credit card EMI is not a fresh loan disbursement. Instead:
- You spend using your existing card limit
- The outstanding amount is converted into EMIs
- Interest, processing fees, and GST are applied
In effect, it is a repackaging of revolving credit into installments.
Interest Rates: The Real Cost Difference
Personal Loan
- Typical interest rates: 10%–18% per annum
- Interest calculated on a reducing balance
- Charges are disclosed upfront
Credit Card EMI
- Effective annual cost often ranges between 18% and 42%
- Includes:
- EMI interest
- Processing fee
- GST on interest
This is why borrowers often underestimate the true cost of credit card EMIs.
Calculation 1: Personal Loan EMI (User Example)
Scenario
- Loan amount: ₹3,00,000
- Tenure: 24 months
- Interest rate: 12% p.a.
EMI (approx.): ₹14,100
Total interest paid: ~₹38,000
Total repayment: ~₹3.38 lakh
👉 You can allow users to calculate this themselves using your EMI Calculator
Calculation 2: Credit Card EMI (Same Amount)
Scenario
- Spend converted to EMI: ₹3,00,000
- Tenure: 24 months
- Effective annual cost: ~30%
EMI (approx.): ₹17,500–₹18,000
Total interest + charges: ~₹1.20 lakh
Total repayment: ~₹4.20 lakh
👉 This comparison clearly shows that credit card EMI can cost over three times more in interest than a personal loan.
Impact on Credit Score (Often Ignored)
Personal Loan
- Adds to credit mix
- Predictable EMI behaviour
- Can improve credit profile if paid on time
Credit Card EMI
- Increases credit utilisation
- Reduces available card limit
- High utilisation can pull down scores
Many borrowers experience sudden score drops after aggressive EMI conversions, similar to patterns explained in why your CIBIL score drops suddenly in India.
Eligibility and Ease of Access
Personal Loan
- Requires income proof
- Subject to credit checks
- Approval may take time
Credit Card EMI
- Instant if limit exists
- No fresh credit check
- Encourages impulsive borrowing
This convenience is precisely why banks promote EMIs aggressively.
When a Personal Loan Makes More Sense
A personal loan is usually the better option when:
- Amount exceeds ₹1 lakh
- Tenure is longer than 12 months
- You want lower total interest
- You want structured repayment
Banks prefer such lending because risk is clearer, as discussed in how Indian banks assess credit risk through internal scoring.
When Credit Card EMI May Be Acceptable
Credit card EMI may work if:
- Amount is small
- Tenure is very short (3–6 months)
- You are disciplined with card usage
- You understand the full cost
Even then, caution is essential.
Quick Comparison: Personal Loan vs Credit Card EMI
| Parameter | Personal Loan | Credit Card EMI |
|---|---|---|
| Interest cost | Lower | Higher |
| Cost transparency | High | Often complex |
| Credit score impact | Usually positive | Can be negative |
| Best for | Large expenses | Short-term needs |
| Bank preference | Strong | Controlled |
Common Borrower Mistakes
- Choosing EMI only for instant approval
- Ignoring GST and processing fees
- Running multiple EMIs on cards
- Maxing out limits
Such behaviour often leads to future rejections, as explained in why banks reject loan applications even with good CIBIL score.
A Practical Rule of Thumb
If the expense is large and the tenure is long, a personal loan is almost always cheaper.
Credit card EMIs buy convenience—but at a cost.
Understanding how much EMI your income can safely handle is equally important. You may also want to review how much EMI is safe for your salary before deciding.
Conclusion
Between personal loans and credit card EMI, the data clearly favors personal loans for most medium-to-large expenses. Credit card EMIs serve a niche role for short-term convenience but can quietly inflate costs and strain credit health.
A financially informed borrower chooses based on total repayment and long-term impact, not just speed of approval.