If you’re in need of instant access to funds for your short-term financial needs, credit cards and personal loans come as quick and easy solutions. Once you get the funds, you can repay the dues in EMIs for both of these options.
Now, the question arises whether a credit card EMI is better for you or a personal loan EMI. Here’s an overview of both of these options to help you make an informed financial choice.
All About Credit Card EMIs
With a credit card, you can borrow funds from the credit card company and convert big-ticket purchases into EMIs. Here’s how these EMIs work:
- You can convert the bill amount to EMI at the time of the transaction or within a specified period after the purchase
- The EMI amount depends on the interest rate applied by the issuer and the repayment duration you opt for
- When you opt for an EMI facility, the transaction amount reduces your credit limit, or it gets added to your bill amount
- Missing EMI payments can lead to penalties and interest charges on the unpaid amount and has a negative impact on your credit score
All About Personal Loan EMIs
A personal loan refers to funds that you borrow from a financial institution to address your various financial needs. You generally pay off the dues via EMIs. It works on this basis:
- The EMI amount includes the principal as well as the interest amount charged on the borrowed amount
- The loan amount, interest rate, and loan duration influence the EMI amount that you need to pay
- Missing or delaying the EMI payments can lead to late repayment charges along with a negative impact on your credit score
Pros and Cons of Credit Card EMIs
Here are the benefits of converting your card purchases into EMIs:
- You can make large purchases without worrying about upfront payments, as you can repay through EMIs later
- Some credit cards also come with no-interest EMI options, enabling you to pay just the cost of the purchase and save on interest costs
- You can get lower interest rates and longer repayment durations if you have a high credit score
It also comes with these limitations:
- This facility comes with higher fees and charges, such as processing charges, interest charges, late payment charges, etc.
- Some issuers allow you to opt for this facility only if you have a high credit score
- Along with levying non-repayment charges, certain issuers may block your credit usage until you repay the dues in full
Pros and Cons of Personal Loan EMIs
Here are the pros of getting a personal loan:
- You can get substantial loan amounts to fund significant expenses or emergencies and repay the dues later
- You enjoy competitive interest rates and repay the amount over a period of your choice
- With fixed interest rates, the EMI amounts remain consistent, and you can plan your budget accordingly
- Timely repayments via EMIs can potentially boost credit score, reflecting financial responsibility
Personal loan EMIs come with these drawbacks:
- If your credit score is lower, you may need to pay higher interest, which influences your EMI obligations as well
- Since you get the benefit of paying off the dues via EMIs, you may be tempted to borrow more than what you need
- Non-repayment or late repayment comes with penalties
Must-Know Differences Between Credit Cards and Personal Loans
Here are some key differences between the EMIs of the two:
| Basis of Difference | Credit Card Loan | Personal Loan |
| Suitability | It is ideal for addressing short-term financial needs, such as shopping, bill payments, booking flight tickets, etc. | It is ideal to cover significant expenses, such as home purchases, education expenses, wedding expenses, etc. |
| Interest Rates | Interest rates are generally higher than personal loans | Interest rates are generally competitive, based on your creditworthiness |
| Application | You can convert a purchase into EMIs on a credit card only if you hold that credit card | You can apply for a personal loan even if you are not an existing customer of the financial institution |
| Maximum Amount | The maximum amount for which you can get the EMI facility depends on the credit limit granted on your card by the issuer | The maximum amount for which you can get a loan with the facility of EMI payments depends on your creditworthiness and overall financial profile |
After in-depth research and comparisons, if you decide that a credit card EMI will be more manageable for you, the next step is to find a good credit card. The One Credit Card allows you to pay the dues through its powerful One Credit Card App anytime and anywhere.
In addition, this card comes with a wide range of features and benefits. You can earn 5X reward points on the top two spend categories and redeem them for numerous perks. You also get to enjoy various exclusive deals and discounts, along with easy conversion of your big-ticket purchases into affordable no-interest EMIs. Apply online to get the card now.
