Loans and EMIs

Credit card EMI or personal loan: which costs less?

How interest, GST and processing fees change the real cost of a card EMI, a no-cost EMI and a personal loan, with the RBI rules behind them.

By Saifu team · 5 October 2026 · 2 min read

Try it: Credit card EMI vs personal loanCompare the real cost of a credit card EMI, a personal loan and carrying the balance on your card, with GST, fees and no-cost EMI included.

When a big purchase does not fit this month, there are three common ways to spread it out: convert it to an EMI on your credit card, take a personal loan, or pay the card bill in parts. They can look similar on the headline rate. The real cost is often very different.

Card EMI

Most banks let you convert a purchase, or a whole bill, into monthly instalments. HDFC Bank, for example, reported SmartEMI rates between about 10.8% and 25% a year for April to June 2026, with a processing fee of up to ₹999 plus GST.

Two things are easy to miss:

GST on interest. Banks add 18% GST to the interest part of every card EMI. A 16% card EMI costs closer to 19% once GST is added.
Your limit stays blocked. The unpaid EMI amount reduces your available limit, which raises your credit utilisation until it is repaid.

"No-cost" EMI

The bank still charges interest. The shop or brand gives you a discount equal to that interest, so it cancels out. You still pay the 18% GST on that interest and the processing fee. RBI said back in 2013 that "the very concept of zero percent interest is non-existent", and its card rules say an EMI with interest must not be presented as no-cost. A no-cost EMI is cheap, not free.

Personal loan

Personal loan rates at large banks started near 10% a year in mid 2026, and went much higher for some borrowers. The processing fee is larger, up to 2% at some banks. The difference that matters: interest on a loan is exempt from GST. Only the fee carries GST.

Since October 2024, lenders must give you a Key Fact Statement before you sign. It shows the annual percentage rate (APR), which adds the fees to the interest, and the full repayment schedule. Compare loans on the APR.

Paying the card bill in parts

This is the expensive route. Cards charge around 3.5% to 3.75% a month on a carried balance, roughly 42% to 45% a year, plus 18% GST on the interest. While any part of last month's bill is unpaid, new purchases also lose their interest-free period.

So which wins?

For a small amount over a few months, a card EMI with a low fee often wins, because the personal loan's processing fee is large relative to the amount.
For a larger amount or a longer term, a personal loan often wins, because its interest has no GST.
A genuine no-cost EMI is usually cheapest of all, if you would have bought the item anyway.
Carrying a balance almost never wins.

Put your own numbers into the card EMI vs personal loan calculator before you decide.

Sources

Rules, rates and limits change. Check the official source linked above before you rely on a figure here. Posts never contain referral or affiliate links from the writer.

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