Should You Apply for Personal Loan to Repay Credit Card Debt?

Updated on: 19 Jan 2024 // 4 min read // Credit Cards // Personal Loans
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Deciding how to tackle Credit Card debt can be a pretty daunting task. You are probably getting different opinions on the best approach, and it all seems pretty confusing! The reality is that each situation is different, and there is no “right” answer, there is however a “right” answer in the context of your specific situation. Let us explore how a Credit Card works and the options available to reduce or repay your Credit Card debt.

Credit Card – The Basics

A Credit Card is a wonderful option provided it is used sensibly. Banks give Credit Cards based on your income and credit history. Usually, a credit score of 750 and above should be sufficient.

How Does a Credit Card Work?

Every Credit Card comes with an interest-free period ranging up to a maximum of 55 days. After this interest-free period, you have two options:

a) Pay the entire outstanding amount on the Credit Card on or before the due date 
b) Pay the minimum amount due on the card (usually 5% of the total outstanding amount)

The first instance is a no-brainer. When you pay the entire outstanding amount before the due date, there is no question of charging any interest on the amount. The limit is restored thereby allowing you to use the card again.

The troubles begin when you wish to go for the second option.

The Minimum Payment Due Concept:

As mentioned earlier, every Credit Card comes with a maximum interest-free period. You are given a grace period to pay the outstanding amount.

Any amount that is unpaid after the grace period is charged an average interest rate of 36% per annum. The interest would account for 3% of the minimum payment, leaving only 2% of the actual Credit Card debt balance that gets paid off every month. This would imply a minimum payback period of 50 months (or over 4 years) provided you don’t put additional debt on the card.

Options available to you to clear the Credit Card dues:

• Convert your Credit Card dues into easy EMIs

You can approach your card issuing bank and request them to convert the Credit Card dues into easy EMIs (Equated Monthly Instalments). The banks charge interest around 18% to 24% per annum. While this is cheaper than paying 36% on your card, you will not be able to use the unutilised limit on the card as the banks usually close the Credit Card accounts.

• Balance Transfer by Applying for a Fresh Credit Card

There are banks that provide Credit Card limits to borrowers to allow them to clear the existing dues. The new card issuing bank pays off the existing dues and issues you a new card. There are certain advantages such as an interest-free period, a fixed interest rate for the first 3 months, and so on. These advantages vary from bank to bank depending on their internal policies. There are certain disadvantages like you might not get the benefit of free interest on incremental purchases. Read the terms and conditions carefully before opting for a balance transfer.

• Consolidate your debt with a Personal Loan

Many people opt for this method of clearing their card dues. It has its advantages and disadvantages.


a) Consolidates all loans under a single umbrella 
b) Easy to keep track of one loan versus several Credit Cards 
c) The rate of interest is usually lower than Credit Card debt


a) Banks usually do not sanction Personal Loans if the credit score is below 750. 
b) Personal Loans are also unsecured loans. Missing any EMI can adversely affect your credit score. 
c) You can go for a longer tenure, but you would end up repaying a higher amount. Check out your financial situation before exploring this option.

Consider the above before you Apply for a Personal Loan from any bank.

• Negotiate for a better and lower interest rate with your Credit Card provider

You can always discuss / negotiate for better terms with your existing bank. While the outcome is dependent on a case by case basis – this alternative might be the least time consuming.


It may be difficult to obtain a Personal Loan with a credit score below 750. Another alternative could be to borrow against an existing property you may own (Against Property):

1. Usually has a lower interest rate than a Personal Loan 
2. However, might take longer to process

As mentioned in the beginning, deciding how to tackle credit card debt can be a pretty dauting task. Let our Loan Specialist help you construct a strategy based on your specific situation. Visit us at www.mymoneymantra.com or call our Loan Specialists toll-free at 18001034004 for further information.