Side by side
| Feature | Credit card | Personal loan |
|---|---|---|
| Interest if repaid in full by due date | None, within the interest-free period | Interest from the first day |
| Interest on a carried balance | Commonly about 3 to 3.75% a month (36 to 45% a year) | Typically 11 to 20% a year for good profiles; higher at NBFCs and apps |
| Cash | Cash withdrawal costs a fee of about 2.5% plus interest from day one | Paid into your bank account; use it anywhere |
| Repayment structure | Flexible; minimum due each month, rest carries interest | Fixed EMI over 12 to 60 months |
| Fees | Annual fee on some cards; late fees; GST on charges | Processing fee of about 0.5 to 4% plus GST |
| Effect on credit score | High utilisation of the limit lowers the score | Instalment loan; on-time EMIs build history |
| Best for | Everyday spending repaid monthly; short bridges | Larger, planned needs repaid over months or years |
Indicative market ranges. Your card’s and lender’s actual rates are stated in the card’s most important terms and conditions and the loan’s Key Fact Statement.
Worked example: ₹1 lakh over 12 months
Suppose you need ₹1 lakh and can repay it over a year. If you carry it on a credit card at about 3.5 percent a month (42 percent a year) and pay it down evenly, the monthly payment is about ₹10,348 and the total interest about ₹24,181. A personal loan at 16 percent for 12 months costs an EMI of about ₹9,073 and total interest of about ₹8,877. Even after a 2 percent processing fee plus GST, about ₹2,360, the loan saves you well over ₹10,000.
The comparison reverses for short gaps. If you buy something for ₹20,000 today and your salary arrives in 20 days, paying the card in full on the due date costs nothing, while even the cheapest personal loan would charge interest and a fee.
The minimum-due trap
Card statements show a small “minimum amount due”, often around 5 percent of the balance. Paying only that keeps the card in good standing, but interest is then charged on the whole outstanding balance, and most cards also withdraw the interest-free period on new purchases until the balance is cleared. A balance that is carried month after month at card rates is the single most expensive form of mainstream credit in India. If you are in that position, a personal loan used to clear the card, followed by paying the card in full every month, is one of the most effective money decisions you can make; see our debt consolidation guide.
What about card EMI conversion?
Most cards let you convert a large purchase, or the outstanding balance, into EMIs. Rates are usually lower than revolving interest, often 13 to 24 percent a year, plus a processing fee and GST. That can be competitive with a personal loan for a single purchase, but the converted amount still blocks part of your card limit, which raises your utilisation. Compare the APR, including fees, with a personal loan’s Key Fact Statement before choosing. For a purchase at a store, a genuine no-cost EMI scheme may beat both.
How to choose in 30 seconds
- Can you repay in full by the next due date? Use the card, and pay the full statement balance.
- Need one to five years? Take a personal loan; compare offers using the EMI calculator and the APR.
- Already carrying a card balance? Move it to a personal loan and stop revolving.
- Need cash, not a purchase? Avoid card cash withdrawals; a personal loan is far cheaper.
Personal loan vs credit card: frequently asked questions
Is a personal loan cheaper than a credit card?
For balances you carry beyond the due date, yes, usually by a wide margin: personal loans commonly cost 11 to 20 percent a year for good profiles, while card interest is often 36 to 45 percent. If you pay the card in full every month, the card costs nothing and is cheaper.
Should I take a personal loan to pay off my credit card?
Often yes, if you have a revolving balance and will stop carrying one in future. The loan replaces high card interest with a lower fixed EMI and lowers your card utilisation, which usually helps your credit score.
How long is the credit card interest-free period?
Typically up to about 45 to 50 days from the purchase, depending on when in the billing cycle you buy and on the card. It applies only if you pay the full statement balance by the due date.
Is withdrawing cash on a credit card a good idea?
Rarely. Cash withdrawals usually carry a fee of around 2.5 percent and interest from the day of withdrawal, with no interest-free period. A personal loan is much cheaper for cash needs.
Does a personal loan or credit card hurt my credit score more?
Neither hurts if repaid on time. High card utilisation, above about 30 percent of the limit, can lower your score, and a missed payment on either damages it. A personal loan adds an instalment account that builds history with on-time EMIs.
Is card EMI conversion better than a personal loan?
It depends on the rate and fees. Card EMI conversions often cost 13 to 24 percent plus a processing fee and GST, and they block part of your limit. Compare the total cost with a personal loan's APR from its Key Fact Statement.
Can I use a personal loan and a credit card together?
Yes, and many people do: the card for everyday spending paid in full each month, and a personal loan for larger needs that take months to repay. The mistake to avoid is carrying a card balance while also paying a loan EMI.
Official sources and further reading
These guides are written from Reserve Bank of India rules and official scheme pages. Rules, rates and scheme terms change, so check the current position on these sites and in your lender's Key Fact Statement before you apply.
- RBI: Key Facts Statement (KFS) for loans and advances. The Reserve Bank of India notification that tells lenders to give every borrower a plain-language statement of the full cost of a loan.
- RBI Complaint Management System. Where to take a complaint against a bank, NBFC or other regulated lender if the lender does not resolve it.
- RBI (Pre-payment Charges on Loans) Directions, 2025. Bars pre-payment charges on floating-rate loans taken by individuals for non-business purposes, for loans sanctioned or renewed from 1 January 2026.
- Reserve Bank - Integrated Ombudsman Scheme, 2021. The single complaint scheme for customers of banks, NBFCs and other RBI-regulated lenders.
- RBI: Free Annual Credit Report to Individuals. Credit bureaus must give you one free full credit report with score every calendar year.
- RBI Financial Education. Consumer guidance from the Reserve Bank of India on borrowing, fraud and your rights as a customer.
Edited by Hemant Kumar. Rates on this site are indicative ranges, not offers.
This page is general information, not personalised financial advice and not an offer. Rates, fees and eligibility shown are indicative ranges based on general market practice in India and vary by lender and applicant. Confirm the exact figures in the lender's Key Fact Statement and sanction letter before you sign.