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| April 7, 2023

Should you clear credit card dues with a Personal Loan?

The world is moving toward cashless and digital financial transactions. Debit/credit cards, UPI payments; NEFT, IMPS, etc are some of the modes of digital transactions. Credits cards are one of the most popular modes of making a purchase. They do away with the need of withdrawing money and physically carrying money to buy something. Credit cards have increased our spending power as they come with an interest-free credit period. However, with such convenience, we sometimes tend to spend recklessly. Not making the entire credit card bill payment on time or paying only the minimum payment due amount, high interest that could range between 30-40% per annum is charged. The unpaid amount as well as interest, finance and late payment charges keep piling up, resulting in credit card debt. Applying for a personal loan to pay off the credit card payment due could help you overcome this financial crisis.

Why Should You Make Credit Card Payments on Time?

A credit card is one of the most convenient ways to shop, pay utility bills, enjoy a vacation or tackle an emergency. Although credit cards provide an interest-free period before a bill is generated, not being careful with its usage could have serious repercussions.

Here’s why you should always make credit card bill payments on time:

  • Credit cards have the highest interest rate for any loan product and can be as high as 35-40% per annum.

  • Interest is calculated on the outstanding credit card bill amount on a daily basis.

  • Finance charges, late payment fees, etc. are some penalties levied on unpaid credit card dues.

  • Even if you pay the minimum due amount of the credit card bill amount, you will still incur interest charges.

  • Not making regular credit card payments in full will severely impact your credit score. Your credit score is an important parameter when you apply for a loan in the future. A low credit score could get your loan application rejected.

  • If you have a low credit score, making timely credit card payments can help you improve your credit score. You can access your free credit report online to keep a track of your credit score.

  • Timely credit card repayments may be rewarded with a credit limit increase, reward points, coupons etc. by the issuer.

Should you take a Personal Loan to Clear Credit Card Dues?

Credit cards in India charge 3%-4.5% per month interest rates, with no risk-based pricing, while personal loan rates are significantly lower. If you are under the burden of credit card debts and finding it difficult to make credit card payments with your savings, applying for a Personal Loan could be a good idea.

Let us discuss the advantages and disadvantages of taking an instant Personal Loan to make outstanding credit card bill payments.

Advantages of Paying your Credit Card Dues with a Personal Loan

  • Personal Loan interest rates are lower than credit card interest rates.

  • Applying for a personal loan doesn’t require any collateral.

  • You don’t have to spend all your savings or liquidate an asset to pay the outstanding credit card bill.

  • If you have outstanding dues on multiple credit cards, one Personal Loan can clear all the dues at one go rather than shelling out a considerably large amount each month for each of those cards.

  • A credit card keeps collecting interest once you get past the interest-free period, and that too on a daily basis. You can choose a loan tenure of your preference when you apply for a Personal Loan. Using an EMI calculator, choose an EMI amount that's affordable for you.

Disadvantages of Paying your Credit Card Dues with a Personal Loan

  • With unpaid credit card dues, your credit score would have already gone low. Applying for a Personal Loan could be a challenge with a low CIBIL score.

  • While a longer-duration Personal Loan means a lower EMI amount, the interest portion of the loan goes up with a longer tenure. So, you might end up paying up more as interest and EMIs than the actual credit card debt.

  • Defaulting on a Personal Loan could further hamper your credit score.

  • If you own an asset, utilizing it to get a loan like a loan against property, loan against gold, etc. could be a smarter option than applying for a high-interest Personal Loan.


Although getting an instant Personal Loan seems like the easiest way to get out of a credit card trap, the pros and cons should be carefully weighed before choosing this option. Applying for a Personal loan to make credit card payments is ideal for someone confident of servicing the EMIs on time or when he/she doesn’t want to compromise on his/her savings or assets



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