Personal Loan vs Credit Card: Which Costs You Less?
Personal Loan vs Credit Card: Which Costs You Less?
Finance · 12 Oct 2025 · 6 min read
When facing an unexpected ₹1-5 lakh expense, most Indians compare a personal loan with their credit card’s EMI offer. The card’s ‘low’ EMI rate is often misleading — once processing fees and the GST on interest are included, costs differ widely.
Headline rates
Personal loans: 10-24% p.a. reducing balance. Credit-card EMIs: 12-30% p.a. reducing balance, plus 1-3% processing fee. Both add 18% GST on interest charged.
Effective annualised cost
A 15% credit-card EMI over 12 months with 2% processing ≈ 19% effective. A 14% personal loan with 1.5% processing ≈ 16% effective. Always compute your APR, not the brochure rate.
Tenure flexibility
Personal loans: typically 12-60 months. Card EMIs: 3-24 months. Longer tenure = lower EMI but more total interest.
When to use a card EMI anyway
If you already have an active reward or cashback that offsets the cost, or you need < 6 months and need fast disbursal, the card can win.
Final word
Run both options in our EMI Calculator with all fees added to principal — the true winner is rarely the one with the lower advertised rate.