The festive season can seem exciting, but it can turn out to be heavy on your pockets. Be it outfits, gifts, gadgets, travel, or dining out; the list is never-ending. Paying bills that are beyond your budget can be a task. But the real question is not the payment, but how to do so smartly.
This is where most get stuck between the same two options: personal loan vs credit card EMI. Both allow one to shop now and pay later, but they work differently and serve different purposes. This post discusses the personal loan vs credit card EMI differences in layman’s language, so that one can decide how to fund the festive shopping without regret later.
The basics

Before diving into the differences between a credit card EMI and a personal loan, it is important to understand what both options mean.

A credit card EMI lets one convert an expensive purchase made on a credit card into equal monthly payments. One does not have to pay the entire amount due at once, but instead pay a fraction of it in instalments. The bank charges interest on the EMI, and sometimes a processing fee, but some stores offer a ‘no cost EMI’ deal during festivities.

A personal loan is one that one borrows from a lender and receives the money in one’s bank account. This must then be repaid in monthly instalments over a certain period. One can use it for any purpose, including the purchase one has in mind.

With this basic understanding, one can now easily understand how the credit card EMI vs personal loan debate plays out.

The differences: personal loan vs credit card EMI

Some key factors that differentiate a personal loan from a credit card EMI and determine which one is better for festive season shopping are:
  • Loan amount: The amount of a credit card EMI is capped by the card’s limit, while a personal loan can offer a larger amount
  • Tenure: Card EMIs have a tenure that is usually shorter, while a personal loan tenure can be chosen to be shorter or longer depending on the amount needed
  • Interest rates: Both will charge interest. One’s personal loan interest rate and card EMI interest can be very different, though, and thus must be compared
  • Fees: Both might levy a processing fee, which should be compared
  • Flexibility: Card EMIs are only for that one card, while a personal loan is more flexible

Thus, when it comes to the credit card EMI vs personal loan debate, it is important to think about how much one needs, how much time one has, and what the interest rates are.

When does a credit card EMI win?

A credit card EMI can be a good choice for festive shopping when one needs to make a small to medium purchase that one can repay comfortably.
It wins when one’s purchase falls under a ‘no cost EMI’ promotion because that means one will not have to pay any additional amount on top of the item’s price. Moreover, it is a quick and easy option available right on one’s card without the need for any application. It becomes a good option for purchasing a single item (e.g., a phone, a fridge) that one will be able to repay in 3-6 months.

However, one must keep in mind that a card EMI is a good option only when one can easily repay, and the festive shopping EMI one takes is within the limits of one’s card. It is not a good idea for one to max out one’s card to fund one’s entire festive season, and thus a card EMI is best for small, planned purchases.

When does a personal loan win?

Generally, a personal loan can win over a card EMI when the festive shopping plan is larger or more diverse: more gifts, more family members to cater to, a home makeover, and/or travel.
The flexibility of a personal loan makes it a good option to fund bigger and more diverse festive shopping plans. With a personal loan instalment, one is not restricted by one’s card or the card’s terms, and one can use it as cash in one’s account to pay wherever one wants. The repayment tenure can be planned longer to keep one’s instalments manageable. Moreover, one can compare personal loan interest rates to find one that suits one’s budget. All of this considered, it is much easier to take control of the festive shopping with a personal loan and plan everything without the worry of the card’s restrictions.

The InstaMoney app offers an easy personal loan experience. One compares one’s eligibility, completes one’s KYC with PAN, Aadhaar, and a bank statement, and if approved, receives the money in one’s bank account. The loan amount varies from around ₹5,000 to ₹1,00,000 with tenures of about 3 to 12 months. The personal loan interest rate varies from 24% to 48% per year (risk basis), and a 6% plus GST processing fee applies. InstaMoney is a digital lending platform, and its loans are disbursed through its NBFC lending partners. This means that one’s eligibility and creditworthiness during the InstaMoney personal loan application will always be the deciding factor. Always compare their clear terms with one’s card EMI before making any decisions.

How to choose the best option for festive shopping

It should be clear now that one does not need to know finance to choose between a personal loan and a card EMI for festive shopping. All one needs to ask themselves are the following questions:
  • How much does one need? Small purchase on one card? A card EMI may be enough. Larger and more diverse shopping plan? Then a personal loan can offer more flexibility.
  • How much time do they have to repay? Short term? Then a holiday shopping EMI on a card is a good option. Longer term? Then a personal loan is a better choice.
  • What are the rates? Compare the card EMI rate against the personal loan rate. Add any additional processing fees to calculate which option will actually end up costing more.
  • Does one want flexibility? If one wants cash to pay for anything and anywhere, a personal loan is the clear winner. If one wants to buy one item on a special offer, a card EMI is a good option.
  • The truth about personal loan vs credit card is that the best option for one’s festive shopping is the one that one can afford to repay. Borrow only as much as one needs, compare terms, and keep the celebration stress-free!

Frequently asked questions

Personal loan vs credit card EMI: which is cheaper for festive shopping?

It depends on the situation. A credit card with a ‘no cost’ option could be great for a single purchase. For larger and more diverse shopping, a personal loan could be cheaper. Compare the amounts one has to pay back to see what is actually cheaper.

Is a festive shopping EMI on my card better than a personal loan for small buys?

If you have a single upcoming purchase, it is something that you can repay comfortably. So, for such a situation, a festive shopping EMI on one's card is a decent option. On the other hand, for larger and multiple purchases, a personal loan is recommended when it comes to the personal loan vs credit card EMI debate.

How do I pick the best option for festive shopping?

Check out the available options that suit your requirements, including the time one has to pay and the associated costs. However, the best option for festive shopping turns out to be the one with clear terms and that which offers an EMI, enabling you to repay the amount comfortably. It is highly recommended that you borrow only as much as you can repay.