When Credit Card EMI Scores Over Personal Loan

  Author: Naveen Kumar

Among all loan products, credit cards charge the highest interest. Next in the pecking order are personal loans. Logically, a person should always prefer personal loans to revolving credit card credit. However, when it comes to equated monthly instalment (EMI) from a credit card, it might just make sense for you to prefer it to personal loans under certain circumstances. Which are these situations? Here’s a quick look at them. 

Loan amount is not large When the loan amount required is well within your credit card limit, you can consider credit card EMI over a personal loan. Of course, be mindful of having enough credit available either on the same credit card or another credit card, in case you opt for the EMI option. This is especially so if you keep your credit card for emergency requirements. Also remember that if the EMIs are manageable and you are confident of paying it off every month within the due date, you will not have to pay the high rates of interest associated with revolving credit on your card. You will just have to pay the interest that is being charged on your EMI.

You need a quick loan Over the years there has been considerable improvement in personal loan processing time. Today, you can get one processed in a few days. However, if you need a loan instantly, use your credit card and convert this transaction into EMIs.

When it’s a less costly option When you have a long relationship with the credit card issuing company, have been regularly using the credit card and have been disciplined on repayments, chances are that you will be offered a card with EMI option. The interest rate for the EMI option will be lower than that of a personal loan. If you have such a card, prefer the credit card EMI to a personal loan.

When you want smooth loan processing A personal loan application process will require you to make arrangements of many documents and go through a physical application process. This is true even if you make an online application. Even in that case you still need to complete the paper work. Compare this with credit card EMI conversion where you can do it online, over the phone or just by a swipe of the card. So, if you want to avoid the long personal loan application and processing, credit card EMI is the option for you.

Since credit cards charge the highest rate of interest, conventional financial wisdom suggests that a credit card EMI option be avoided. But as we have just seen, in some cases going for a credit card EMI makes more sense than a personal loan.

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