Do introspect credit card EMI option before choosing to pay off dues

Last Updated : Nov. 28, 2019, 3:46 p.m.

Such is the obsession that credit cardholders have that they keep on shopping for a wide range of stuffs like clothes, electronics, consumer durables, books and many more via the cashless instrument. But as they say excess of everything is bad, similarly excess of credit card shopping can haunt your financial life miserably with interest rate as high as 30%-40% per annum, taking out a significant chunk from your pocket. So, when you see the inflated bills, you start getting headaches and search for a proper mechanism to pay off the debt in a suitable manner. You ask among the friends and they suggest you to convert your credit card debt into equated monthly installment (EMI) option. But before choosing this option, keep yourself updated with the pros and cons of credit card debt repayment via EMIs. In this article, we will detail you on both the fronts so that it will be easy for you to decide whether the option is feasible or not.

Modus Operandi & Advantages

You can get the EMI facility from very few lenders on your credit card. The facility will allow you to convert the debt in EMI with the yearly rate of interest likely to be around 16%-18%, almost half or more than the normal interest rate of 30%-40%. Another advantage is that you just need to contact the customer care centre of the lender to access EMI facility, relieving you from the hassles of making a fresh application by submitting a list of documents to avail such service.

Things to look seriously in EMI option

• The EMI conversion does not come free of cost as you have to pay a one-time processing fee on the debt amount. The processing fee may be fixed or a certain percentage of the loan you opt for. The bank, however, can waive your processing fee on your request to do the same if you are a loyal customer.
• The credit limit gets reduced significantly while opting for the EMI option. The reduced limit will also bring down your spending capacity on the credit card and also worsen the credit score due to higher credit utilization.
• Credit card EMIs are good till the time when you make repayments on time. Moment you alter in the repayment, the interest rate will go up to the earlier level and take out a lot from your pocket.
• Not all repayments can be converted into EMIs. Payments over Rs 5,000 can be converted into EMIs.

What should you do?

• The best way to pay off the credit card dues is to avail personal loan or a loan against fixed deposit due to lower rate of interest on both the alternatives. Interest rate on personal loan ranges from 12%-24% per annum, while it is between 11%-13% in case of loan against fixed deposit, which is a secured lending.
• The said alternatives can boost your credit score.
• Don’t get carried away by the higher credit card limit on card as it could create chaos in your financial life. Be a disciplined buyer and avoid spending on unnecessary things to avoid the mar of higher dues.