Credit cards in India today offer far more than a revolving line of credit. Two features that have become increasingly popular among cardholders are the credit card loan, also known as an instant loan or loan on credit card, and the EMI conversion facility for large purchases.
While both options allow cardholders to access or manage credit through their existing card, they work differently and are better suited to different financial needs. Understanding the distinction between a loan against a credit card and an EMI conversion, and knowing which is more appropriate for a given situation, is essential for making cost-effective credit decisions. Bajaj Markets provides detailed guidance on both options and helps cardholders choose the most suitable product.
What Is a Credit Card Loan?
A credit card loan is a pre-approved loan offered by the credit card issuer to eligible cardholders, disbursed as a lump sum amount either into the cardholder’s bank account or as a credit to the credit card account.
Also referred to as a loan against a credit card, this product allows cardholders to access cash beyond their immediate credit limit or utilise their existing credit limit in a structured, term-based repayment format. The loan against a credit card comes with a fixed interest rate, a defined repayment tenure, and a structured EMI schedule, making it function similarly to a personal loan in terms of repayment mechanics.
Unlike a cash advance, the credit card loan does not attract the immediate high interest rate associated with ATM withdrawals.
What Is EMI Conversion?
EMI conversion is a facility that allows a cardholder to convert a specific high-value retail purchase or an outstanding balance into a series of fixed monthly instalments. Unlike a credit card loan, which involves disbursement of a new credit amount, EMI conversion restructures an existing charge on the credit card into a manageable repayment schedule.
The interest rate applicable to EMI conversions varies by issuer and tenure, and is generally lower than the standard revolving interest rate but may be higher than the rate on a loan against a credit card or a personal loan.
Key Differences Between Credit Card Loan and EMI Conversion
The primary difference between a credit card loan and an EMI conversion lies in their purpose and structure. A loan against a credit card provides fresh funds to the cardholder, either in cash or as additional purchasing power, and is repaid over a structured tenure.
EMI conversion, on the other hand, restructures an existing transaction or balance and does not provide any additional funds. In terms of interest rates, a loan against a credit card may carry a lower rate than EMI conversion in some cases, making it a more cost-effective option for cardholders who need to borrow larger amounts.
However, EMI conversion is simpler to initiate and does not involve a formal loan application or credit assessment.
Which Option Is Better?
The choice between a credit card loan and EMI conversion depends on the cardholder’s specific requirement. If the need is for fresh cash, for example, to fund a home repair or medical expense, a loan against a credit card is the more appropriate option, as it disburses funds directly. If the need is to manage an already-incurred large expense by spreading the repayment over several months, EMI conversion is more suitable. In terms of cost, cardholders should compare the effective interest rate of both options, including any processing fees, before making a decision.
Bajaj Markets provides a transparent comparison of both credit card loans and EMI conversion products across multiple card issuers, enabling cardholders to make a well-informed choice.
In Conclusion, both the credit card loan and EMI conversion are useful tools for managing credit card spending more affordably and efficiently. The better option depends on whether the cardholder needs fresh funds or wishes to restructure an existing liability.
A loan against a credit card is better suited for fresh borrowing, while EMI conversion works best for managing existing large-ticket transactions. Visit Bajaj Markets to compare credit card loans and EMI conversion options, understand the applicable interest rates and fees, and make the most cost-effective decision for your financial needs.
