For a big-ticket purchase, the choice usually comes down to converting it on your credit card or taking a personal loan. The card charges 18% GST on its interest and a small flat fee; the loan's interest is GST-exempt but its processing fee is a percentage of the amount. Which structure wins depends on rate, tenure and loan size — here is a ₹1,00,000 purchase priced both ways.
The verdict: which one costs less
At the rates each product actually offers, the personal loan usually wins. Financing ₹1,00,000 for 12 months costs about ₹8,108 on a personal loan at 11.5% per annum (including a 1.5% processing fee) versus about ₹10,041 on a credit card EMI at 15% (including GST on interest and a ₹199 fee) — a gap of roughly ₹1,933. The surprise is what happens if the rates are equal: at the same 14% over 12 months, the card EMI is actually about ₹140 cheaper, because its flat ₹199 fee undercuts the loan's percentage-based processing fee by more than the GST on interest adds. The card's structural handicap — 18% GST on every rupee of interest — only takes over on longer tenures and bigger balances.
₹1 lakh over 12 months: the comparison table
Assumptions, so you can rerun them yourself: ₹1,00,000 financed for 12 months; personal loan at 11.5% per annum reducing with a 1.5% + GST processing fee; credit card EMI conversion at 15% per annum reducing with a ₹199 + GST fee. Both EMIs use the standard reducing-balance formula.
| What you pay | Credit card EMI (15% p.a.) | Personal loan (11.5% p.a.) |
|---|---|---|
| Monthly EMI | ≈ ₹9,026 | ≈ ₹8,862 |
| Interest over 12 months | ≈ ₹8,310 | ≈ ₹6,338 |
| GST @18% on interest | ≈ ₹1,496 | ₹0 — loan interest is GST-exempt |
| Processing fee + GST | ₹235 (flat ₹199) | ₹1,770 (1.5% of amount) |
| Total cost of borrowing | ≈ ₹10,041 | ≈ ₹8,108 |
| Cost per ₹10,000 borrowed | ≈ ₹1,004 | ≈ ₹811 |
Your rates, fee and tenure will differ — plug your actual offers into our free EMI & Effective Price Calculator and compare the effective totals side by side before you sign either.
Credit card EMI: GST on interest, but a flat fee
A credit card EMI conversion turns an existing purchase into instalments at the bank's reducing-balance rate — typically 13–18% per annum for conversions, well below the 36–45% revolving rate but above most personal loans. Two charges ride on top: 18% GST on the interest component of every instalment (credit card interest is specifically carved out of India's GST exemption for loan interest), and a one-time conversion fee that is usually flat — commonly ₹99–₹299 plus GST, though some issuers charge 1% of the amount. The conversion is instant, needs no documents, and blocks your card limit for the outstanding amount. Watch the exit door too: pre-closing a card EMI typically costs 2–3% of the outstanding plus GST, and reward points on the converted purchase are usually clawed back.
Personal loan: cheaper rates, heavier processing fee
A personal loan is priced like a loan, not a card: rates for salaried borrowers with good credit scores commonly run 10.5–16% per annum, its interest is GST-exempt, and the sanctioned amount arrives in your bank account rather than blocking a card limit. The structural cost sits at the front: processing fees are usually 1–2% of the loan plus GST — ₹1,770 on our ₹1 lakh example — which is why a personal loan only pays off when its rate advantage or a longer tenure can amortise that fee. Disbursal takes anywhere from minutes (pre-approved offers) to a few days, and floating pre-payment rules vary: RBI has pushed lenders to drop foreclosure charges on floating-rate loans to individuals, but fixed-rate personal loans can still carry 2–4% pre-payment penalties. Read the sanction letter for both numbers before comparing.
Tenure and rate: where the crossover happens
The two fee structures cross over as the borrowing grows. GST on card interest scales with tenure and amount, while the card's flat fee does not; the loan's percentage fee scales with amount but not tenure. Stretch our same-rate 14% example from 12 to 24 months and the card EMI's total climbs to about ₹18,207 against the loan's ₹17,001 — the GST drag has overtaken the fee saving, and the gap keeps widening with every additional month. The practical rules: for small, short conversions (under roughly a year), the card EMI's flat fee keeps it competitive even at a slightly higher rate; for anything 18 months or longer, or where a personal loan undercuts the card rate by two points or more, the loan wins on arithmetic alone.
Decision rules: which to use when
- Short tenure, modest amount: a card EMI at a fair conversion rate is quick, paperless and — thanks to the flat fee — often within a few hundred rupees of the loan, or ahead of it.
- 18 months or longer, or ₹1.5 lakh and above: take the personal loan; GST on card interest plus the longer amortisation tilts the maths decisively its way.
- Buying a gadget at a sale: check merchant no-cost EMI first — our no-cost EMI vs credit card EMI breakdown shows it usually beats both of these routes when it is on the table.
- Compare effective totals, never EMIs: a lower EMI with a fatter fee can still cost more — the calculator outputs the all-in figure for any rate, fee and tenure combination.
For more India-specific money-and-tech breakdowns, see our UPI credit line vs credit card comparison and the ITR Category Finder for tax season.