Credit card EMI vs personal loan
Same amount, same months, three ways to pay. See which costs least once interest, GST and processing fees are added, including what a "no-cost" EMI really costs.
Extra you pay over the amount, split by what it is
Why GST changes the answer
Interest on a loan is exempt from GST. Interest on a credit card, including the interest inside a card EMI, is not: banks add 18% GST to it every month. Processing fees carry 18% GST on both. So a card EMI at the same rate as a loan still costs more.
What "no-cost" EMI means
The bank still charges interest. The shop or brand gives you a discount equal to that interest, so the interest cancels out. The 18% GST on the interest and the processing fee are not covered, so you still pay a little. RBI has said that the idea of zero percent interest does not exist, and an EMI with interest must not be shown as no-cost.
Carrying a balance is the expensive choice
If you pay only part of the bill, interest runs on the whole balance from the date of each purchase at around 3.5% to 3.75% a month, plus GST, and you lose the interest-free period on new spends too. That is roughly 42% to 45% a year before GST.
How it is worked out: each option is repaid in equal monthly instalments over the same number of months using the standard EMI formula. Card interest has 18% GST added. Fees have 18% GST added.
Guides
Questions
Is a credit card EMI cheaper than a personal loan?
Sometimes, when the card EMI rate is low and the fee is small, especially for small amounts and short terms, because personal loans carry a larger processing fee. For bigger amounts the loan often wins because loan interest has no GST. Put your own numbers in.
Does a no-cost EMI really cost nothing?
No. You still pay 18% GST on the interest that was discounted and on the processing fee. It is cheap, not free.
Does converting to EMI affect my credit score?
The EMI amount stays blocked on your card limit until it is repaid, which raises your credit utilisation. Paying every EMI on time helps your history.
Sources
- RBI: zero percent EMI schemes (17 September 2013)
- HDFC Bank SmartEMI terms: GST on interest and fee
- ICICI Bank: credit card interest and GST
- HDFC Bank: personal loan rates and charges
For illustration only. Banks round differently and some charge GST on fees at booking. Check the Key Fact Statement for a loan and the EMI terms for your card. Saifu does not offer or link to loans.
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