Carrying a credit card balance from month to month is one of the most expensive ways to borrow in India. A personal loan usually charges far less. So is it worth taking a personal loan to clear your credit card debt? This guide compares the two with real published rates and a worked example, and shows the catches to watch for.
Why is credit card debt so expensive?
Three things push up the cost:
- A high monthly rate. SBI Card's most important terms and conditions, for example, say finance charges are up to 3.75% per month (45% a year) on unsecured cards, and 2.75% per month (33% a year) on some secured and defence cards.
- Interest from the day you spend. If you do not pay the full amount due, the FAQ in RBI's credit card directions says the interest-free period is lost and interest may be charged from the date of each transaction.
- GST on the interest. Interest on ordinary loans is exempt from GST, but a CBIC circular says that exemption does not cover interest in credit card services. SBI Card's EMI terms list GST at 18%, and their sample repayment table shows tax equal to 18% of the interest.
Interest also compounds. A rate of 3.75% a month works out to about 55.5% over a year before GST, if nothing is repaid.
What about the minimum amount due? RBI's credit card directions say it must be set so that your debt does not grow, and your statement must warn that paying only the minimum stretches repayment over months or years. Paying the minimum avoids a late fee. It does not stop interest.
How much cheaper is a personal loan?
Personal loan rates depend on your credit score, income and the lender. Two published rate sheets:
| Lender | Personal loan rates | As of |
|---|---|---|
| SBI | 10.00% to 15.00% a year (2-year MCLR of 8.75% plus 1.25% to 6.25%) | With effect from 15 December 2025, page updated 28 September 2026 |
| Union Bank of India (salaried) | 9.30% for scores of 800 and above, up to 12.60% for scores below 650 | Effective 8 October 2026 |
A personal loan is repaid in fixed EMIs (equated monthly instalments). Each EMI pays some interest and some of the loan, and interest is charged only on what you still owe. So the debt has a fixed end date.
Worked example: ₹2,00,000 of card debt
Say you owe ₹2,00,000 across your cards and stop using them for new spending. Compare two choices.
Option A: keep paying ₹10,000 a month to the card. We assume 3.75% a month on the balance, plus 18% GST on the interest. In the first month, interest is ₹7,500 and GST is ₹1,350. So only ₹1,150 of your ₹10,000 reduces the debt.
Option B: take a personal loan of ₹2,00,000 at 13% for 24 months and clear the cards at once. The 13% is an assumption within the published ranges above; your offer may differ. We also assume a processing fee of 1.5% plus GST.
The EMI formula is: EMI = P × r × (1 + r)^n ÷ [(1 + r)^n − 1], where P is the loan, r is the monthly rate (yearly rate ÷ 12 ÷ 100) and n is the number of months.
| Item | A: Pay the card ₹10,000/month | B: Personal loan at 13% |
|---|---|---|
| Monthly payment | ₹10,000 | ₹9,508 |
| Months to clear the debt | 50 | 24 |
| Interest | ₹2,53,830 | ₹28,201 |
| GST on interest | ₹45,689 | Nil |
| Processing fee with GST | Nil | ₹3,540 |
| Total cost of borrowing | ₹2,99,520 | ₹31,741 |
In this example, the loan costs about ₹2,67,779 less, needs a smaller monthly payment, and finishes 26 months sooner.
This is a simplified model. Real card interest is worked out daily from each transaction date, and late fees or new spending would raise Option A's cost further.
What are the catches?
- The cards must stay paid. Clearing the cards frees up your limit. If you run them up again, you will have both a loan and card debt.
- Fees. Check the processing fee, GST and any insurance bundled with the loan. The Key Facts Statement (KFS), which RBI requires for retail loans sanctioned from 1 October 2024, shows the Annual Percentage Rate (APR): the yearly cost including all charges. Compare APRs, not headline rates.
- Prepayment terms. Some personal loans are fixed-rate and may carry a charge if you close early. Read the KFS before you sign.
- Approval is not certain. Lenders look at your credit score, income and existing EMIs. Each application appears in the "Enquiries" section of your credit report, so apply selectively rather than everywhere at once.
- Do not borrow more than the dues. A bigger loan means more interest.
What about the card's own EMI or balance transfer offer?
Many card issuers let you convert dues into EMIs or move a balance to another card. These can be cheaper than revolving credit, but compare them carefully:
- RBI's card directions say issuers must quote the APR separately for situations such as retail purchases, balance transfers and cash advances.
- An EMI conversion with an interest component must not be shown as "zero-interest" or "no-cost". The issuer must show the principal, interest and any discount upfront.
- Card EMIs may carry a processing fee, and GST applies to the interest.
Put the card offer's APR next to the personal loan's APR and pick the lower all-in cost.
How do you consolidate card debt with a personal loan, step by step?
- List every card balance with its monthly rate from your statement.
- Check your credit report. You can get one free full credit report a year from each credit bureau, as RBI requires. Fix errors before applying.
- Get two or three loan quotes and compare the APR in each KFS.
- Borrow only the total dues and pay off every card the day the money arrives. Keep the zero-balance statements.
- Set up auto-debit for the EMI, and if you keep the card, set it to pay the full amount each month.
Do it in 10 minutes, free
Use the LowerMyEMI EMI calculator to see the EMI and total interest on a consolidation loan, then the compare offers calculator to put quotes side by side. Both export to Excel or PDF.
If you already have a personal loan at a high rate, LowerMyEMI can write one email per lender asking for a lower-rate offer. You send them from your own email. We are not a lender and never promise a rate; each lender decides.