EMI refers to the equated monthly instalments. There are exclusive loans that can be used for various needs, so it is much easier to avail of loans nowadays. You can plan for a proper loan and check on the rates of interest through the EMI calculator.
You can use the loan calculator to determine the EMI you must pay based on the loan amount and tenure. The EMI depends on several factors, which include the loan amount, tenure, and the rate of interest fixed by the financed institution. It is upon you to pay back the money through instalments on time. There is also an option to take a loan through a credit card and repay it through EMIs.
What Does Repaying a Loan Using a Credit Card Refer To?
When banks and financial institutions grant loans for a particular tenure, you must repay the amount monthly as per the due date. You can also choose to pay this amount using your credit card. The major concern that arises, in this case, is the credit card limit. You may have to pay the penalty if you cross the credit card limit while paying your EMI. The transaction may also be declined in some cases.
Now, let’s understand why it is beneficial to pay your loan EMI through credit cards-
Benefits of Paying Loan EMI Through Credit Cards:
Better Financial Management: Smaller EMI payments using your credit card will help you experience less financial burden.
Can Generate Significant Savings: The borrower is not required to pay the entire amount while paying the EMI with their credit cards. Therefore, they can put any surplus money in their savings account and earn interest. They have the potential here to make significant savings.
Enhances Credit Profile: Customers are less likely to default on payments because they will pay in EMIs. As a result, they can gradually improve their credit history over time.
Tenure of Flexible Repayment: The credit card bill repayment for the loan period can be customised. Typical tenures are 3, 6, 9, and 12 months. Some banks allow for a 36-month extension. Therefore, the loan payment becomes less hectic for the borrower in the long run when they use their credit cards.
Easy Repayment: Your EMIs can be paid easily if you decide to repay with your credit card. The EMI amount can either be deducted from your monthly credit card limit.
Are There Any Disadvantages of Using a Credit Card to Repay Loan EMIs?
When you decide to pay your loan EMI using your credit card, you are essentially borrowing the bank’s money to repay them. In this case, you are again taking a short-term loan when using your credit card. It is essential to repay the credit card bills before the due date. Otherwise, you may have to face the consequences afterwards.
It will incur high-interest rates and penalty charges per annum. Even if you pay the minimum amount due, you will be charged a considerable amount in every billing cycle, depending on the amount owed and the credit card issuer’s terms. If you do not pay your credit card bills on time, the interest-free period will be terminated until the debt is paid off.
Is Paying Loan EMI Through Credit Card Worth it?
A credit card can be ideal when you want to allocate funds instantly. Every month, you can pay the stipulated EMI using a credit card. However, the interest rate is usually higher. EMI calculators can be found on the lender’s websites to help you understand it better.
Often, we might forget to pay EMIs through a credit card. It might be a risky attempt if you fail to pay the money. You will then have to pay the due amount next month. The interest rate on this amount (loan interest rate and credit card interest rate) will escalate from 24% to 36%, depending on the lender’s interest rate.
Be very careful with your card limit. When you take a loan and use a credit card for the same, instalments will cross the cash limit. You have to pay the penalty if you spend more than your required limit.
Make sure you calculate your EMIs beforehand using an EMI calculator so that it doesn’t become a problem to repay the loan amount with your credit card. Research properly and make informed decisions when it comes to loan payments.