When managing Car Loan payments, a common question arises - Can we pay Car Loan EMI through a Credit Card? This idea can be tempting, especially for those looking to maximise Credit Card rewards or manage cash flow more flexibly. However, understanding this approach is important before deciding it's a beneficial financial strategy.
Understanding Car Loan EMI payments
Car Loan EMIs (Equated Monthly Installments) are a popular method of financing a car. These fixed monthly payments are calculated based on the principal loan amount, interest rate and loan tenure. You can use tools like Axis Bank's Car Loan EMI Calculator to estimate your monthly payments and plan your finances accordingly.
Can we pay the Car Loan EMI with a Credit Card?
Technically, the answer to whether we can pay Car Loan EMI with a Credit Card is yes, but it depends on the policies of the Car Loan provider. Some may allow you to make your EMI payments using a Credit Card, either directly or through third-party payment gateways. As a process Axis bank is making EMI payments through Repayment Bank submitted at the time of disbursement. In case of default Customer has an option to pay the Car loan EMI with a Credit Card
Should you use a Credit Card to pay off a Car Loan?
Here are some factors to consider before using a Credit Card to pay off a Car Loan -
1. Interest rates: Car Loan interest rates are generally high. Credit Cards typically have higher interest rates compared to Car Loans. If you cannot pay off the Credit Card balance in full by the due date, you may end up paying significantly more in interest than you would with a Car Loan. While a Car Loan interest rate might range between 7% and 15%, Credit Card interest rates can be as high as 30%.
2. Rewards and cashback: One potential benefit of paying your Car Loan EMI with a Credit Card is earning rewards or cashback. If your Credit Card offers significant rewards and you can pay off the balance in full every month, this strategy could be advantageous.
3. Credit utilisation: Using your Credit Card to pay a large amount like a Car Loan EMI might increase your credit utilisation ratio, which can negatively impact your credit score if not taken into consideration properly.
4. Car Loan EMI Calculator: Before deciding on the payment method for your Car Loan, using a Car Loan EMI Calculator can be very helpful. This tool allows you to input the loan amount, interest rate and tenure to determine your monthly EMI. By comparing this with the potential costs of using a Credit Card, you can make a more informed decision.
Also Read: How can you reduce your car loan EMI?
Final thoughts
So, can we pay Car EMI through a Credit Card? Yes, but it's essential to consider the potential costs and benefits carefully. Using a Credit Card to pay your Car Loan EMI can offer short-term financial flexibility and the chance to earn rewards, but it also comes with risks, such as higher interest rates and potential fees. Always weigh the pros and cons and consider your financial situation before you make a decision.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
