When you're thinking about a major expense—like a medical bill, a gadget, or a sudden family expense—two options usually come to mind: take out a personal loan from a bank, or convert the amount into credit card EMIs. Both look similar on the surface: fixed term, fixed monthly expense, that's it. But one is almost always more expensive than it appears. The difference lies in interest rates, hidden charges, and how forgiving each option is if something goes wrong. Let's try to understand which is the biggest drain on your pocket: a credit card or a personal loan?

Interest Rates on Credit Cards and Personal Loans?
Interest rates on personal loans these days typically range widely. If you have a good credit score, a stable salary, and a stable income, you can expect rates starting as low as 1,000. If your profile is weak, rates increase rapidly. Credit card EMIs are rarely affordable. Even when a bank advertises no-cost EMI, the interest rate is often included through processing fees or small discounts. Standard card EMI interest, when annualized, can easily exceed 1824%. Simply put, for the same amount and time, personal loans typically charge a lower interest rate than card EMIs—unless you qualify for a very low card offer.

The Myth of No-Cost EMI
No-cost EMI sounds good, but it's important to be careful. In many cases, the merchant offers a discount equal to the interest amount, making the EMI appear cheaper. You're not saving money—you're paying the full price instead of getting a discount upfront. Credit card EMIs typically also incur processing fees and GST. These fees don't reduce your principal, but they increase your costs. Personal loans also have processing fees, but they're usually clearly stated and taken into account when comparing offers.

Impact on Your Monthly Flexibility
Personal loan EMIs are fixed, predictable, and separate from your daily expenses. Once set up, your credit card is free for emergencies. Credit card EMIs reduce your card limit, reducing your available credit until the EMI is paid in full. If your card limit is low, it can secretly force you to use more, which can harm your credit score. If you miss a card EMI, the consequences are even worse. Late fees are higher, interest increases, and interest can start accruing on your entire card balance. Personal loans are more structured and slightly more forgiving.

Tenure and Control
Personal loans offer longer tenures, often up to five years. This helps manage EMIs for larger expenses. Credit card EMIs are typically shorter, typically 6 to 24 months. A shorter tenure means higher monthly expenses, even if the headline rate appears the same. Prepayment is another difference. Many personal loans allow part-prepayments after a few months, sometimes with minimal penalties. Credit card EMIs are difficult to close early without losing the so-called no-cost benefit.

So which one saves you more money?
If expenses are high and not tied to a special merchant offer, a personal loan is almost always cheaper in the long run. Credit card EMIs may be suitable for short-term purchases where you have a clear idea of ​​the total expense, time is short, and the offer is truly transparent. Still, it's worth considering which discounts you're giving up. The biggest mistake is choosing based solely on convenience. Credit card EMIs seem easier, but they're often more expensive. Personal loans involve a little more paperwork, but they generally take better care of your wallet.

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