Personal Loans and credit cards are two of the most popular ways to borrow money in times of emergencies. However, if not used responsibly, they can lead to a financial mess too. That’s why it’s important to understand how to manage these financial instruments effectively. In addition, while repayment you can convert the amount into simple monthly instalments, popularly known as EMIs. Thus, it won’t feel like a burden on your pocket.
In this blog, we’ll provide you with some of the best advice on Personal loans and credit card EMI conversion.
Before jumping directly to EMIs, it is important to understand the differences between Personal loans and Credit Card loans. The following points can help you:
- Credit card loans are usually pre-determined by the card issuer based on your credit score. Whereas a Personal Loan is determined by the customer and either ratified or modified by the financial institution.
- You must own a credit card before you qualify for credit card EMIs. But you can obtain a Personal Loan from an institutional lender without having a credit card.
- No documents are needed to approve your credit card loan or EMI, but a financial institution would require documents and maybe collateral before offering you a loan.
- Your credit card loan may be approved and disbursed within minutes, but it may take three or more days to get a Personal Loan approved and disbursed.
- Credit card EMIs are usually for short-term purchases of high-worth items, but Personal Loans can be applied towards home renovation and car purchases over a repayment tenure of up to five years.
- The interest rate on credit card EMI may be significant and add up if you don’t pay up your credit card balance before applying, compared to a Personal Loan which is fixed.
What is EMI and how does it work?
EMI stands for Equated Monthly Instalment. It is a credit card feature that allows users to purchase high-value items such as electronics and household appliances. The user can choose to repay the amount through monthly payments, making it easier to pay off without incurring a lump sum expense. Any credit card EMI is paid off over several months, and the billing is reflected separately on your credit card statement. You can easily apply for a credit card online to take advantage of this feature.
If you make a request, your credit card transactions can be converted into EMI. After approval, interest will be charged on the amount that is converted to EMI. In some cases, you may also be charged a small processing fee for converting your credit card to EMI.
Which is the better option a Personal Loan or a Credit Card EMI?
Choosing the best option between a Personal Loan and a credit card EMI conversion depends on several factors. These are some of them:
- Interest rates
The interest rates for credit card EMI differ from issuer to issuer. Your credit card company will check if you have fully repaid the balance on your credit card, the EMI fund requested, and the number of months for repayment to calculate your EMI payments.
In the case of a Personal Loan, the interest rate may range from 13% and 25% based on review factors.
- Months of repayment
As with any loan, the number of months chosen for repayment is very important to determine the suitability of a loan. In many cases, credit card companies prefer for customers to pay up their EMI within six months, but a Personal Loan can be extended to as many as 36 months. You must consider your options and your ability to repay with ease critically before making a decision.
- Purpose of loan
The suitability of a loan depends on its intended purpose. If you need fast cash for purchasing household items, furniture, gas, and other short-term expenses, then credit card EMI conversion may be a good option. However, for larger expenses such as vehicle repairs, mortgage payments, academic fees, hospital bills, and business financing, you should consider a Personal Loan. With Personal Loans, you have the opportunity to obtain larger loan amounts that can be repaid over several years, compared to credit card EMIs.
Whether you need quick cash for short-term expenses or larger amounts for bigger financial commitments, there are options available to you through Personal Loans and credit card EMI conversion. By understanding the differences between these two options and their respective pros and cons, you can make an informed decision that best suits your needs. Remember to do your research, compare rates, and choose a lender that offers favourable terms and conditions. With the right approach, Personal Loans and credit card EMI conversion can help you achieve your financial goals.
In a nutshell, in times of urgent financial need, Personal Loans can be beneficial. However, for regular usage, you can get a credit card online.