PERSONAL LOAN VS. CREDIT CARD EMIS: CHOOSING THE RIGHT OPTION

Two forms of credit options, which people have to turn to when they are compelled to seek funding include personal loans and credit card EMIs. Both of the choices allow consumers to use borrowed money and pay it back over time but the details are different: the terms, interest rates and methods of repayment. It is therefore important to fully comprehend the various choices available in order to come to an intelligent choice.

Important Differences Between Credit Card EMIs and Personal Loans

1. Amount of Loan

• Personal Loan: Talking about thereafter for purchases, personal loans usually provide larger credit limits ranging from a few thousand to several lakhs based on the credit provider and the credit seeker.

• Credit Card EMI: The pin based credit card EMIs are comparatively low, based on the credit control of the particular card. This means that the quantity of the sum you can borrow is limited by the number of credits on your card.

2. Rates of Interest

• Personal Loan: Another feature of personal loans is that the interest rates offered for them are lower than credit card EMIs. 

• Credit Card EMI: Credit card EMIs are normally charged at even higher interest rates, mostly within the range that is actually high.

3. Duration of Repayment

• Personal Loan: Personal loans tend to be structured over relatively longer periods with payment periods normally extending from 12 months to 5 years.

• Credit Card EMI: Credit card EMIs come with shorter repayment tenure about 3 months to 2 years at most depending on the credit card provider company.

4. Charges and Fees for Processing

• Personal Loan: Personal loans may attract certain processing fees normally assuming between 1% – 2% of the amount sought. It could also include charges including prepayment or early closure.

• Credit Card EMI: The interest rates as well as cash back on credit cards EMIs have little or no processing fees and are known to apply a one-time conversion fee whenever a purchase is transferred to EMIs. Also, it would be possible to receive late payment fees and interest charges.

5. Use Flexibility

• Personal Loan: A lot of people use personal loans in instances like medical bills, home improvement, vacation or to clear earlier debts or some other need that they envisage meeting in the near future.

• Credit Card EMI: Credit card EMIs are usually applied to purchases made through the credit card for goods and services, for which the EMI has been chosen from options offered, such as electronics, appliances, and travel tickets, which may not offer a great deal of flexibility.

Conclusion

Deciding between these is only possible if proper regard is paid to one’s financial status and purposes. However, if you need a higher amount to borrow for a longer period of time but at a slightly lower interest rate, then a personal loan perhaps is the right product for you. 

But if your expense is relatively lower, if you don’t need a large sum of credit for a long time and if you are comfortable with smaller credit periods, converting a purchase into a credit card EMI definitely comes in handy. It may be Plus or Minus depending on circumstances but before deciding go through whether repayment ability, interest rates, and your goals align with the used option.