You pay the card every month, sometimes more than the minimum, and the balance barely moves. Someone suggests taking a personal loan to clear it. It sounds like swapping one debt for another, so is it actually better?
Short answer: A personal loan to pay credit card debt often works because card interest is typically around 36–45% a year, while many personal loans cost far less. It works only if the loan covers the full card balance, you pay the card off the same day the money arrives, the total repayment including the processing fee and GST is lower, and you stop running the card up again.
Why card debt is so hard to shift
Credit card interest on a revolving balance in India is typically around 3–3.75% a month, plus 18% GST on that interest. Once you start revolving, interest usually applies to new purchases as well until the balance is fully cleared.
A personal loan works differently. It has a fixed rate, a fixed EMI and a fixed end date. Each EMI includes some principal, so the balance falls every month on a schedule. That structure is often worth as much as the lower rate.
A worked example: Kavya’s ₹2 lakh card balance
Kavya, 30, Kochi, owes ₹2,00,000 on her credit card at 3.5% a month. She pays ₹10,000 every month. These figures are an example only.
Staying on the card. Her first month’s interest is ₹7,000, and GST on it is ₹1,260. So of her ₹10,000, only ₹1,740 reduces the balance. At this pace it takes about 44 months to clear, and she pays about ₹4.32 lakh in total, of which roughly ₹2.32 lakh is interest and GST.
Taking a personal loan. A lender offers 16% a year (reducing balance) for 24 months with a 2% processing fee. To receive enough to clear the card, she borrows ₹2,05,000:
- Processing fee: 2% of ₹2,05,000 = ₹4,100, plus 18% GST = ₹4,838, deducted upfront.
- Amount she receives: ₹2,05,000 − ₹4,838 = ₹2,00,162, enough to repay the card.
- EMI = P × r × (1+r)^n ÷ ((1+r)^n − 1), with P = ₹2,05,000, r = 16% ÷ 12, n = 24. That gives ₹10,037.
- Total repaid: ₹10,037 × 24 = about ₹2.41 lakh.
| Option | Monthly payment | Months | Total repaid |
|---|---|---|---|
| Keep paying the card | ₹10,000 | 44 | about ₹4,32,100 |
| Personal loan, 24 months at 16% | ₹10,037 | 24 | about ₹2,40,900 |
| Personal loan, 36 months at 16% | ₹7,207 | 36 | about ₹2,59,500 |
For almost the same monthly payment, the 24-month loan finishes 20 months sooner and costs about ₹1.91 lakh less. The 36-month loan lowers the EMI but costs about ₹18,600 more than the 24-month one. Pick the shortest tenure you can comfortably afford. You can run your own numbers in our EMI calculator.
The rate you are offered depends on your income, credit history and existing EMIs, so do not assume 16%. Compare the APR and the total amount payable on each lender’s Key Fact Statement (KFS). Our APR vs interest rate guide explains why the APR is the number to compare.
When it works, and when it does not
A personal loan is likely to help if:
- Your card balance has been revolving for months and is not falling.
- The loan’s APR is clearly lower than your card’s rate, including fees and GST.
- The new EMI fits your budget. Lenders check your FOIR, the share of income going to EMIs. Our FOIR eligibility calculator gives you an idea before you apply.
- You are ready to stop using the card for anything you cannot pay in full.
It is less useful if:
- The balance is small. If you can clear it in two or three months by cutting spending, or with an EMI conversion, the processing fee may not be worth it. See converting your card bill to EMI.
- A balance transfer is cheaper for you. If you can clear the debt within a promo period, compare the two in balance transfer vs personal loan.
- You are spending more than you earn. A loan will not fix that, and the card will fill up again.
Card balance not shrinking? Check whether one fixed EMI could clear it faster.
How to do it the right way
- Get your exact payoff amount. Call your card issuer or check the app for the total outstanding, including any unbilled interest, not just the last statement.
- Borrow for the full amount. Add the processing fee and GST so that what lands in your account covers the whole card balance. A partial payoff leaves the card revolving at full interest.
- Check the lender. Under RBI’s digital lending rules the money must come straight into your own bank account, and you should get a KFS before you sign. Look up the lender in our lender directory.
- Pay the card the day the money arrives. Do not let it sit in your account for a week. Money that sits around tends to get spent.
- Confirm a zero balance. Check the next statement and keep the payment receipt.
- Set autopay for the new EMI on or just after salary day.
The double-debt danger
Here is the trap. After the payoff, Kavya’s card shows ₹0 and a full limit. If she gradually runs it back up to ₹1,00,000 and revolves, she pays about ₹4,130 a month in interest and GST on the card (₹3,500 + ₹630), on top of her ₹10,037 EMI. She would now be worse off than before she borrowed.
This is the most common way consolidation goes wrong. A few habits help:
- Remove the card from shopping apps and wallets.
- Ask your bank to lower the card limit for now.
- Use a debit card or UPI for daily spending until the loan is done.
- Keep a small emergency buffer so the card is not your safety net.
Our 30-day plan to stop borrowing again has more on this.
Check before you apply
- The APR and total amount payable in the Key Fact Statement (KFS), compared with what you pay today
- Processing fee plus 18% GST, and any insurance or add-ons (ask whether they are optional)
- Foreclosure charges on your existing loans and on the new loan
- That the new loan covers every debt you plan to close, and that you will get a closure letter or NOC for each
- Whether the new EMI fits your monthly budget after essentials and savings
- That the lender is RBI-regulated: check our lender directory and loan app directory
Frequently asked questions
Is it smart to take a personal loan to pay off a credit card?
Often, yes, if the loan’s APR is well below your card’s rate and you stop using the card for unpaid balances. Always compare the total you would repay on the card with the loan’s total payable shown in the KFS, including the processing fee and GST.
Will a personal loan to clear card debt hurt my CIBIL score?
The application adds a hard enquiry, which may cause a small dip. As your card utilisation drops and you pay the EMI on time, your score usually improves. Our guide to credit card debt consolidation covers the other routes too.
Should I close my credit card after paying it off with a loan?
Not necessarily. Closing it reduces your total available limit, which can raise utilisation if you have other cards. Many people keep it with no balance and a lower limit. If you know you will be tempted, closing it may be the safer choice for you.
How much personal loan can I get to clear card dues?
It depends on your income, existing EMIs, credit history and the lender’s policy. Most lenders look at your FOIR after the new EMI. If the loan you qualify for is smaller than your card balance, clear the costliest card first and avoid leaving part of it revolving for long.
Disclosure: FundsTiger (Gatimaan Finance Advisors Pvt. Ltd.) is a loan marketplace and lending service provider for RBI-regulated lenders. Aparampaar Finance Pvt. Ltd. (Omozing), one of those lenders, is a related party of FundsTiger. This article is general information, not financial advice. Read your loan agreement and KFS before you decide.