Personal Loans and Credit Card EMIs: Need ₹1 lakh urgently—for a medical bill, wedding expenses, or a new gadget? Your bank has two fast solutions: a credit card EMI or a personal loan.
Both options may seem simple, but the true costs can differ greatly.
In 2026, even if interest rates seem alike, hidden fees, GST on costs, and RBI guidelines can lead to one option costing thousands more than the other.
This guide outlines the comparison between personal loans and credit card EMIs with straightforward Indian examples to help you determine the more affordable and safer choice.
What Is a Personal Loan?
An unsecured personal loan is available from banks and NBFCs to assist with costs related to medical emergencies, travel, education, or to consolidate existing debts.
- Interest rate: 10%–24% per year (varies with credit score & income)
- Tenure: 1 to 5 years
- EMI: Fixed every month
- Usage: No restrictions
Best for: Larger sums and predictable, long-term repayment structures.
Table of Contents
What Is Credit Card EMI?
With credit card EMI, you can transform a substantial purchase or an existing bill into monthly installments.
- Interest rates: 13%–36% annually.
- Term: 3 to 24 months.
- Often marketed as No-Cost EMI, although GST and processing fees are still charged.
The converted EMI amount limits your card’s available credit.
Credit card EMIs are quick and convenient, but they are generally more costly than personal loans.
Personal Loan and Credit Card EMI: Basics
Personal Loans and Credit Card EMIs: Before making a cost comparison, here’s how both options operate:
1. Personal Loan (PL)
- An unsecured loan that is directly credited to your bank account.
- Based on your CIBIL score and the stability of your income.
- Ideal for: ₹50,000 to ₹25 lakh, with extended repayment terms.
- Advantage: Your credit card limit is not impacted.
2. Credit Card EMI
- Converts a purchase or bill into monthly installments.
- Best suited for: ₹10,000 to ₹2 lakh, with shorter repayment periods.
- Limitation: Your credit limit is held until the EMIs are fully paid off.
For example, if your card limit is ₹1 lakh and you switch ₹80,000 to EMI, you will have ₹20,000 left to use.
Personal Loan vs Credit Card EMI: 2026 Comparison
Personal Loans and Credit Card EMIs: In 2026, borrowing can happen in an instant—but the costs involved are not negligible. When opting for a personal loan versus a credit card EMI, the real distinctions are in interest, fees, and the term of the loan, rather than only the EMI amount.
| Feature | Personal Loan | Credit Card EMI |
| Interest Rate | 10% – 16% p.a. (can go up to 24%) | 13% – 36% p.a. (usually higher) |
| Processing Fee | 0.5% – 2.5% of loan | ₹199–₹999 + GST (or 0–3%) |
| Approval Time | 24 hrs – 3 days (instant if pre-approved) | Instant |
| Tenure | 12 – 60 months | 3 – 24 months |
| Credit Limit Impact | No impact | Blocks credit card limit |
| Foreclosure Charges | 2% – 4% + GST | ~3% of outstanding amount |
Real Cost Comparison: Which Is Cheaper?
Example 1: ₹2 Lakh Loan
Personal Loan
- Interest: 12% | 3 years
- EMI: ~₹6,640
- Total Interest: ~₹39,000
Credit Card EMI
- Interest: 24% | 24 months
- EMI: ~₹10,600
- Total Interest + GST: ~₹54,000+
Personal loan saves ~₹15,000
Final Takeaway
- Higher amount / longer tenure → Personal Loan wins
- Short-term + genuine No-Cost EMI → Credit Card EMI can be better
- Always calculate interest + fees + GST, not just EMI
Which Has Higher Interest: Credit Card or Personal Loan?
In general, the effective interest rate of credit card EMI tends to be higher than that of a personal loan when you factor in:
- GST on interest
- Processing and foreclosure fees
- The loss of the interest-free credit period
This is why credit cards are best suited for short-term, low-value expenditures rather than for long-term borrowing.
When Credit Card EMI Makes Sense
Choose credit card EMI if:
- Amount is below ₹50,000
- Tenure is 3–6 months.
- You’re getting a genuine no-cost EMI.
- You have strong repayment discipline.
When a Personal Loan Is Better
- The amount is ₹1 lakh or more.
- The repayment period is 12 months or longer.
- You want lower interest and stable EMIs.
- You want to avoid high credit utilization.
What Happens If You Miss a Credit Card EMI?
Neglecting a credit card EMI can lead to expensive repercussions:
- Late fee: ₹500–₹1,300
- Interest rates may surge: Up to 40%+ annually
- Credit score reduction: 50–100 points
Although personal loans also penalize defaults, the penalties associated with credit cards are generally more stringent.
Better Alternatives to Credit Card EMI
If both options feel expensive, consider:
- Loan against FD or mutual funds
- Employer salary advance
- BNPL (Buy Now Pay Later) for very short tenures
What Should You Choose?
Choose a Personal Loan If:
- You need cash in hand
- The amount is large
- The tenure is long
- You want to protect your credit score
Choose Credit Card EMI If:
- It’s a true No-Cost EMI
- The purchase amount is small
- You need instant approval
For high amounts or extended terms, personal loans are often more economical and secure.
Credit card EMIs should be used strictly for short-term, well-considered purchases.
5 Disadvantages of Credit Card EMI You Must Know
- The credit limit is restricted.
- High interest rates apply without any No-Cost options.
- GST is charged on interest monthly.
- Severe penalties are imposed for late payments.
- The minimum payment requirement can lead to a cycle of debt.
Frequently Asked Questions (FAQs)
Which is cheaper: Personal Loan or Credit Card EMI?
Most of the time, personal loans are more affordable because their interest rates are lower (around 10.5%–14%) than those of credit card EMIs (14%–24%). Still, a legitimate no-cost EMI on a credit card can be less expensive for short-term expenses.
Is Credit Card EMI bad for your credit score?
Credit card EMIs are safe for your credit score as long as you pay on time. Problems happen when credit utilization goes over 30% or EMIs are missed, because credit cards can harm scores more than personal loans.
What is better: Credit Card or Personal Loan?
Credit cards are best for small, quick expenses, while personal loans suit larger amounts and longer repayment schedules. The correct choice depends on your needs and how long you plan to repay.
How much personal loan can I get in India?
In general, banks provide personal loans that are worth 10 to 20 times your monthly income, which is determined by your credit score and existing EMIs. For example, a person making ₹50,000 monthly may be eligible for a loan ranging from ₹5 lakh to ₹10 lakh.
How can I get ₹50,000 immediately?
When you need ₹50,000 fast, a credit card cash withdrawal is the quickest route, but it can be quite costly. A better option is to apply for a pre-approved personal loan through net banking, which is often disbursed right away and has a lower overall expense.
So, Which One Actually Saves You Money in 2026?
Personal Loans and Credit Card EMIs: In 2026, loans are available instantly—but the costs are real. For lower interest, steady EMIs, and long-term savings, a personal loan is often the better choice, particularly for larger amounts or longer terms. Credit card EMIs should primarily be used for short-term needs or when a genuine no-cost EMI is offered. Always look at the total cost, not just the EMI, before deciding—and follow Eco Nivesh for smarter financial guidance.
