Personal Loan vs Credit Card EMI: Which festive loan works better for your Diwali shopping?

Diwali season is the perfect excuse to upgrade, gift, and splurge a little. Whether you are buying new clothes, jewellery, electronics, or furniture, you’ll come across attractive discounts. But what if your bank balance is still not catching up? This is where instant credit options like personal loans and credit cards can help you. Both options are easily accessible and let you buy despite a tight budget. Given the convenience of both options, it gets difficult to choose. This blog gives you a detailed comparison to help you decide.

How credit card EMI works?
 

Credit card EMIs help you break up larger purchases into smaller, manageable payments.

Here’s how shopping on a credit card EMI works:

· Convenience: If you already have a credit card, converting your purchase into EMIs is almost instant. Applying for a new credit card is just as easy if you have a stable income with a good credit score.

· Tenure: The tenure to repay EMIs can typically range anywhere between 3 to 24 months (some cards may include longer tenures). If you opt for no-cost EMI, the tenure is mostly fixed, for example, 6 or 9 months.

· Interest: The standard interest rates on credit card EMI purchases can start can go up to 30% or higher. This depends on your card and repayment tenure. No-cost EMI option waives the interest component.

· Other charges: The bank may levy a one-time charge to convert your transaction to EMIs. Prepayment or foreclosure also attracts a nominal charge. This varies based on the credit card provider.

· Impact on credit limit: The full amount of your purchase using the credit card is blocked against your credit limit and released gradually as you repay the EMIs. This reduces your available credit for other purchases.

· GST on interest component: An 18% GST is applicable on the interest and processing fees. This is applicable even on the credit card no-cost EMI offer, where the bank adds interest, the seller covers it with a discount. The GST on the interest, however, gets added to your monthly EMI.

How do personal loans work
 

When your shopping list starts looking more like a wishlist, a personal loan can make financing your purchases easier.

Here’s what you need to know about this festive loan:  

· Eligibility: Lenders offer the Diwali loan amount and the interest rate based on your age, income stability, credit score, and debt-to-income ratio.

· Interest rates: The interest rates on personal loans typically start at 9.99% p.a (for a FIRSTmoney personal loan) and vary based on your credit score and other eligibility factors.

· EMI and Tenure: You get the flexibility to decide on fixed EMIs and tenure as per your budget. The tenure ranges from 9 months to 60 months (for a FIRSTmoney personal loan), giving you maximum flexibility to repay.

· Disbursal: Both the application and disbursal are quick for digital personal loans thanks to minimal documentation and a digital process. The disbursal happens in a few hours. In the case of FIRSTmoney personal loan, disbursal can happen within 30 minutes and requires no paperwork.

· Processing fees: A processing fee ranging between 1% to 3% of the loan amount is charged, but some festival loan offers may waive this charge.

· Other charges: Lenders may also charge for late payment of EMIs, defaulting, or foreclosure (sometimes exempted, like in the case of IDFC FIRST Bank personal loan).

Personal loan vs credit card EMI: Key differences
 

Both personal loans and credit card EMIs can make festive shopping pocket-friendly. But here are the key differences that provide a clearer picture of their unique appeal:

Why personal loan is better?
 

A festive loan like a personal loan makes for an apt choice when shopping this Diwali, as it checks all these features:

· High borrowing amount
 

You can shop for high-value items without restricting it to the conversion of one purchase into EMIs, like in the case of credit cards. With festive loans, you can borrow a sizeable amount. For example, IDFC FIRST Bank FIRSTmoney loan lets you borrow up to ₹10 lakhs instantly.  

· Longer tenure
 

You can spread your loan repayment over up to 5 years. This meets your flexibility needs. However, it is recommended not to stretch it too long as it affects your interest outgo.  

· Predictable EMIs
 

The interest component and other charges are mentioned in the loan agreement. They influence your Diwali loan EMIs. Any other component like GST or other hidden charges, don’t surprise you later.

· No restrictions on usage
 

You can spend the borrowed amount for any use you deem fit.

· No merchant dependency
 

Credit card EMI offers are often limited to partner brands and select stores. Personal loans don’t depend on where you’re spending.

Cost Comparison: Personal Loan and Credit Card EMI
 

Let’s take an example to understand the value you get out of a purchase with a personal loan and credit card EMI. Suppose your total purchase cost is ₹80,000 during Diwali shopping.

Here’s how the borrowing cost works for Diwali loan and credit card EMI:

You save ₹11,496 with a personal loan. Here, the practical hypothesis is used to explain the interest and processing fee applicable on Diwali loan and credit card EMI.

The formula for this calculation is: EMI = [P x R x (1+R)^N] / [(1+R)^N - 1]. To avoid the complexity and save time, you can use the IDFC First Bank personal loan EMI calculator available online.

Impact of personal loan and credit card on credit score and utilisation
 

Borrowing with a festive loan and credit card quietly shapes your credit score in the background. Here’s how it works in both cases:

· Credit limit impact: Converting your purchases into EMIs on your credit block a portion of your available credit limit. This raises your credit utilisation ratio (percentage of available credit). A high ratio can pull down your credit score. This does not happen with a personal loan.

· Risk of multiple applications: Applying for a personal loan with multiple lenders can trigger a hard enquiry on your credit report. Too many enquiries in a short span can dent your score.

· Missed due dates: If you fail to pay your EMIs on time, whether through a credit card or personal loan, your credit score takes a hit.

5 Tips to Borrow Wisely
 

Diwali shopping with festival loan offers can be fun with smart borrowing techniques such as:

· Negotiate better rates: Negotiating interest rates based on your ongoing relationship with the bank, good credit score, or income stability.

· Prepay smartly: Use your bonuses and variable income to prepay wherever. Most lenders allow this without penalty, and some with a nominal fee. It is worth the fee to reduce your loan burden.

· Stack festive deals: Combine Diwali sale offers smartly with personal loan offers from banks, brand-led discounts, and other possible cut-downs through exchanges and promo codes.

· Assess costs: Compare the total festive loan cost as opposed to just the interest rate.

· Plan for EMIs: Prepare for EMI repayments well before you hit the apply button.

Conclusion
 

Now that you have clarity on the differences between shopping with a personal loan and a credit card festive offer, you can decide what works for you. Both are good options to support your Diwali shopping aspirations. For more flexibility with usage and repayment, a personal loan is ideal at the same time converting every purchase into a credit card EMI is also a feasible option.

If that makes sense and you want to understand how much you can afford, use the IDFC FIRST Bank personal loan eligibility calculator now!

Why consider FIRSTmoney Personal Loan for your Diwali shopping
 

With Diwali around the corner, timely access to funds can make your festive shopping stress-free. The FIRSTmoney Personal Loan from IDFC FIRST Bank offers:

· Instant approval & disbursal: Get up to ₹10 lakh credited to your account in as little as 30 minutes — ideal for last-minute festive purchases.

· Low interest rates: FIRSTmoney personal loan starts at just 9.99% p.a.

· Flexible repayment options: Pick an EMI plan and tenure (9–60 months) that suits your monthly budget and comfort.

· Zero foreclosure charges: Close your loan early anytime without extra costs.

· No collateral required: Enjoy the freedom of an unsecured loan without pledging any assets.

· Completely digital process: Apply online with simple video KYC — no paperwork, no branch visits.

Whether it’s gifts, home décor, or festive fashion, FIRSTmoney Personal Loan helps you shop conveniently, responsibly, and on time, making your Diwali celebrations brighter.