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The cheaper option depends on how much you need, for how long, and how fast. Here is the arithmetic, in rupees.
Short answer: For short-term needs up to your pre-approved offer, a loan on credit card such as AU Small Finance Bank’s SMARTLoan, with rates starting at 1.2% per month and instant disbursement with no documentation, is the faster, simpler choice. For large sums over long tenures, compare it with bank personal loan rates. Both beat revolving a card balance, as of September 2026.
The phone call usually comes at an awkward time. A parent needs a medical procedure, a child’s semester fee is due on Friday, or the car needs a ₹60,000 repair before Monday. Savings are locked in a fixed deposit, and breaking it feels wrong. Two options come to mind at once: a personal loan from the bank, or the loan offer that keeps appearing in your credit card app.
Both are unsecured loans, and both are repaid in EMIs. But they are priced, quoted and processed very differently, which is why comparing them head-on confuses most borrowers. This article puts both side by side with worked rupee examples, explains how to read a monthly rate against an annual one, and shows when each option costs less.
What is a loan on credit card and how does it work?
A loan on credit card is a pre-approved loan offered to an existing cardholder, based on their card relationship, and repaid in fixed monthly EMIs. Because the bank already knows your repayment history, it can approve and disburse the loan within minutes.
There are two common structures in India. In the first, the loan is carved out of your available card limit and billed as EMIs on your card statement. In the second, the loan sits outside your card limit and is paid directly into your savings account, so your limit stays free for everyday spending.
AU Small Finance Bank offers both styles to eligible cardholders:
- SMARTLoan: instant disbursement into any savings account, a fully digital journey with no documentation, and interest rates starting at 1.2% per month. Your card limit stays available for regular purchases.
- Xpress Loan: instant disbursement, no documentation and a low processing fee, offered within your existing card limit.
Eligible AU Credit Card holders see their pre-approved offer in the AU 0101 app or net banking, choose the amount and tenure, and confirm. You can see current offers on AU Small Finance Bank’s loan on credit card page.
How do you compare a monthly interest rate with an annual rate?
To compare a monthly rate with an annual one, multiply the monthly rate by 12: a rate of 1.2% per month equals 14.4% per annum. Card-linked loans are usually quoted per month, while personal loans are quoted per annum, so this conversion is the first step.
The second step is to check how interest is calculated. On a reducing-balance loan, interest is charged only on the principal still outstanding, which falls with every EMI. On a flat-rate loan, interest is charged on the original amount for the full tenure. For any quote from any lender, ask which method applies, and compare the Annual Percentage Rate (APR) shown in the Key Fact Statement that the RBI requires lenders to provide.
The third step is to add one-time costs: processing fees and GST at 18% on those fees. On a short loan, a processing fee can change the answer more than the interest rate does.
The fourth step is to think about how early you might repay. If a bonus or a maturing deposit is due in a few months, check the foreclosure terms of each option, because closing a loan early cuts the interest you pay. Finally, compare EMIs against your monthly budget. A good rule used by many financial planners is to keep all EMIs together below 40% of take-home pay, so a new loan never squeezes your household spending or your ability to pay the card bill in full.
Which is cheaper for ₹1 lakh over 12 months?
On ₹1 lakh repaid over 12 months, a loan on credit card and a bank personal loan end up almost level once processing fees are added, and the card loan reaches your account the same day with no paperwork. The worked figures below use standard reducing-balance EMI formulas.
| Option | Rate used | Monthly EMI | Total interest over 12 months |
|---|---|---|---|
| AU Small Finance Bank SMARTLoan (rate starting 1.2% p.m.) | 14.4% p.a. | ₹8,998 | ₹7,971 |
| Bank personal loan (HDFC Bank’s advertised starting rate) | 9.99% p.a. | ₹8,791 | ₹5,493 |
| Revolving the card balance (SBI Card’s published finance charge) | 3.75% p.m. / 45% p.a. | ₹10,501 | ₹26,015, plus 18% GST on interest |
Now add the one-time costs. Suppose the personal loan carries a processing fee of 2%, which would be ₹2,000 plus GST, or ₹2,360. The personal loan’s all-in cost rises to about ₹7,853, almost level with the card loan. The advertised starting rate also goes to borrowers with the strongest profiles, so many applicants will be quoted higher.
The revolving row is the real warning. Carrying ₹1 lakh on a card for a year at the published finance charge costs more than three times either loan. Any structured loan beats paying only the minimum due.
When is a loan on credit card the better choice?
A loan on credit card is the better choice when you need money today, the amount fits your pre-approved offer, and the tenure is short. Speed and zero paperwork are its biggest advantages.
Consider a second example: ₹50,000 for 6 months. At 14.4% p.a., the EMI is ₹8,687 and total interest is ₹2,121. A fresh personal loan for this amount would need an application, income documents, a credit check and a processing fee, all to save a few hundred rupees in interest, if any. For small, short loans, the card loan usually wins on total cost and convenience.
A card loan also suits you when:
- It is an emergency. SMARTLoan and Xpress Loan disburse instantly, straight from the app.
- Your paperwork is not handy. No salary slips, bank statements or ITRs are needed for an AU Small Finance Bank pre-approved offer.
- You want your card limit free. SMARTLoan pays into your savings account and leaves your card limit available.
- You have an existing card relationship. Your repayment record with AU Small Finance Bank drives the pre-approval.
When does a personal loan work out cheaper?
A personal loan often works out cheaper for larger amounts, such as ₹5 lakh and above, and for tenures of three years or more, especially for borrowers with a CIBIL score above 750. Over long tenures, each percentage point of rate adds up.
Take ₹2 lakh over 24 months. At 14.4% p.a. the total interest is about ₹31,370; at 9.99% p.a. it is about ₹21,473. After a 2% processing fee of ₹4,720 including GST, the personal loan still saves roughly ₹5,000. The larger and longer the loan, the more the headline rate matters and the less the processing fee does.
A personal loan also offers higher amounts. HDFC Bank, for example, advertises personal loans of up to ₹50 lakh, well beyond typical card-based offers. The trade-off is time and documents: expect income proof, bank statements and a full credit assessment.
How do speed and documentation compare?
A loan on credit card is usually disbursed within minutes with no documents, while a personal loan can take from a few hours to a few days depending on your profile and paperwork. The table below sets out the practical differences.
| Factor | AU Small Finance Bank SMARTLoan / Xpress Loan | Bank personal loan |
|---|---|---|
| Approval | Pre-approved for eligible AU Credit Card holders | Fresh application and credit check |
| Documentation | None | ID, address, income proof, bank statements |
| Disbursement | Instant | Hours to days |
| Where the money goes | Savings account (SMARTLoan, over and above card limit) or within card limit (Xpress Loan) | Savings account |
| Rate quoted as | Per month, starting 1.2% | Per annum, starting around 10% at large banks |
| Best for | Urgent, short-term, smaller amounts | Large, planned, long-tenure borrowing |
Both loans are reported to credit bureaus. Paying every EMI on time improves your CIBIL score; missed EMIs hurt it, whichever product you choose.
Which AU Credit Cards give you access to a loan on credit card?
All four of AU Small Finance Bank’s flagship cards, the AU Ananta, AU Laksya, AU Tejas and AU Prathama Credit Cards, give eligible cardholders access to pre-approved SMARTLoan and Xpress Loan offers in the AU 0101 app and net banking. The offer grows out of your card relationship, so the card you pick mainly shapes the rewards you earn along the way.
Two of the four add a handy option for big purchases. The AU Laksya Credit Card offers zero processing fee on Xpress EMI, so a large appliance or gadget purchase can be split into monthly instalments at no processing cost. The AU Prathama Credit Card also supports Xpress EMI conversion, which suits a first-time cardholder buying a phone or laptop.
The AU Ananta and AU Tejas Credit Cards bring extra cover alongside credit. The AU Ananta Credit Card carries a credit shield of ₹5 lakh and an air accident cover of ₹50 lakh, while the AU Tejas Credit Card includes a credit shield and a device protection plan. Both add a layer of cover that borrowers value.
| Card | Annual fee & waiver | Headline benefit | Best for |
|---|---|---|---|
| AU Ananta Credit Card | ₹2,000 + GST; nil on ₹3 lakh retail spend | Pre-approved loan offers plus ₹5 lakh credit shield | Travellers planning big-ticket trips |
| AU Laksya Credit Card | ₹1,000 + GST; nil on ₹2 lakh spend | Zero processing fee on Xpress EMI | Families spreading large purchases |
| AU Tejas Credit Card | ₹500 + GST; nil on ₹1.5 lakh retail spend | Loan offers plus device protection plan | Young earners with app-based spending |
| AU Prathama Credit Card | ₹100 + GST; nil on ₹75,000 retail spend | Xpress EMI conversion from the first card | First-time borrowers |
Conclusion
There is no universal winner between a loan on credit card and a personal loan. For small and urgent needs, a card loan such as AU Small Finance Bank’s SMARTLoan, starting at 1.2% per month with instant, paperless disbursement, often costs about the same or less once processing fees are counted. For big, planned borrowing over several years, a personal loan at a low annual rate can save you money.
What you should avoid is revolving a large balance on your card. Holders of the AU Ananta, AU Laksya, AU Tejas and AU Prathama Credit Cards can all check pre-approved offers, with Laksya and Prathama adding Xpress EMI for large purchases. If you already hold an AU Credit Card, check your pre-approved offer in the AU 0101 app, convert the rate to per annum, add all fees, and choose the option with the lowest total cost. AU Small Finance Bank makes that comparison quick, because the offer is already waiting in your app.
Frequently Asked Questions (FAQs)
is a loan on credit card cheaper than a personal loan?
It depends on the amount and tenure. For small, short loans, a card loan like AU Small Finance Bank’s SMARTLoan, starting at 1.2% per month, can cost about the same as a personal loan once processing fees are added. For large, long-tenure loans, a personal loan with a low annual rate may cost less overall.
what is 1.2% per month interest in per annum terms?
A rate of 1.2% per month equals 14.4% per annum when multiplied by 12. On ₹1 lakh repaid over 12 months on a reducing balance, the EMI is about ₹8,998 and the total interest about ₹7,971. Always check whether a rate is calculated on a reducing or flat basis.
does a loan on credit card reduce my credit limit?
That depends on the product. AU Small Finance Bank’s SMARTLoan is disbursed into your savings account and keeps your card limit available for regular purchases. The Xpress Loan is offered within your existing card limit, and the blocked amount is released as you repay each EMI.
what documents are needed for a loan on credit card?
For AU Small Finance Bank’s pre-approved SMARTLoan and Xpress Loan, no documentation is needed. The offer is based on your existing card relationship, so the journey is fully digital through the AU 0101 app or net banking. A personal loan, by contrast, usually needs income proof and bank statements.
how quickly can i get a loan on my credit card?
Pre-approved card loans are usually disbursed within minutes. AU Small Finance Bank’s SMARTLoan and Xpress Loan offer instant disbursement, which makes them useful for medical bills, fees or repairs needed the same day. A new personal loan can take a few hours to a few days.
does taking a loan on credit card affect my cibil score?
Yes, like any loan, it is reported to credit bureaus. Paying every EMI on time adds positive repayment history and can improve your CIBIL score over time. Missing EMIs lowers your score. Set up AutoPay from your savings account so each instalment is paid before the due date.
can i get a loan on au laksya or au prathama credit card?
Yes. Eligible holders of the AU Laksya and AU Prathama Credit Cards, like all AU Small Finance Bank cardholders, can view pre-approved SMARTLoan and Xpress Loan offers in the AU 0101 app or net banking. Both cards also offer Xpress EMI, and the AU Laksya Credit Card charges zero processing fee on it, which makes large purchases easy to spread into instalments.
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