The rate gap
Personal loans from banks run 11–16% for salaried borrowers with a clean CIBIL. Credit card EMI conversion sits at 14–22% — some banks flash a "low" headline rate but bake the rest into a 2–3% processing fee. Personal loans also charge processing, usually 1–2%. The real comparison is the all-in cost, not the sticker rate.
Worked example
₹2,00,000 borrowed, 24-month tenure. CC EMI quoted at 20% reducing. Personal loan at 12% reducing with 1.5% processing.
| Item | Credit Card EMI | Personal Loan |
|---|---|---|
| Rate (reducing) | 20% | 12% |
| Monthly EMI | ≈ ₹10,180 | ≈ ₹9,415 |
| Total interest | ≈ ₹44,400 | ≈ ₹25,960 |
| Processing fee (2% / 1.5%) | ₹4,000 | ₹3,000 |
| Total cost | ≈ ₹48,400 | ≈ ₹28,960 |
Net saving with the personal loan: ≈ ₹19,400. Add GST on CC fees and the gap widens.
When CC EMI wins
The maths flips in three cases. Small amount, short tenure — under ₹50k for under 12 months, the PL processing fee eats the interest saving. Genuine zero-fee EMI promos from the merchant (no markup hidden in the price) can be free money. You don't want a new tradeline on your credit report — a fresh PL inquiry and account both ding your score short-term.
Common mistakes
- Falling for "lower interest" CC EMI promos that bundle a 2–3% upfront fee plus GST — the effective rate is often higher than your PL quote.
- Ignoring foreclosure charges on the personal loan — typically 4–5% on the outstanding principal if you prepay early.
- Taking a PL to roll over expenses you can't actually afford — you've just stretched the bill, not solved it.
- Applying without checking your CIBIL first — every rejected application leaves a hard inquiry that drags the score.
Updated May 26, 2026. Rates and fees vary by lender and borrower profile. Compare offers before signing.