# Personal Loan vs Credit Card: Which is Cheaper?

*Published: 2026-09-15 | Author: The Credit Compass Editorial Team | Category: Personal Loans*

> Carry a credit card balance and you could pay 24%-45% a year in interest — nearly double even the priciest personal loan. Here's the bank-by-bank math on which route actually costs less.

## Personal Loan vs Credit Card: The Short Answer

If you can't clear a credit card bill within its interest-free window, a personal loan is almost always the cheaper route — and if a fresh personal loan isn't practical, a loan against your existing credit card limit usually beats carrying the balance on the card itself. The gap between the three isn't small: as of published bank rate cards effective 1 August 2026 (verified 23 August 2026), personal loans from major banks run roughly 9.99%-24% per annum, a loan against your credit card limit runs roughly 11%-20.5% per annum depending on the issuer and your bureau score, and an unpaid credit card balance costs roughly 24%-48% per annum (1.99%-3.75% a month at most large issuers, per rate pages compiled by paisabazaar.com and bankbazaar.com).

| Route | Typical rate (p.a.) | What sets your rate |
|---|---|---|
| Personal loan (bank) | 9.99% – 24% | CIBIL score, income, existing EMIs |
| Loan against credit card limit | 11% – 20.5% | Issuer, your bureau score, credit limit usage |
| Credit card revolving balance | ~24% – 45% (1.99%-3.75%/month) | Card variant — largely fixed regardless of your score |

*Personal loan rates from Axis Bank, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, and SBI's Xpress Credit scheme, effective 1 August 2026 (axis.bank.in, hdfc.bank.in, icici.bank.in, kotak.bank.in, sbi.bank.in). Credit card and loan-against-card rates compiled from paisabazaar.com, bankbazaar.com, icici.bank.in, and hdfc.bank.in — see the sections below for the bank-by-bank breakdown.*

One caveat: if you can pay your card bill in full by the due date, the interest-free period (typically 20-50 days per most issuers' own disclosures) means the card costs nothing extra. Everything below is about what happens once you can't do that.

## Why Credit Card Interest Is So Much More Expensive

A credit card's headline rate looks similar to a personal loan's ceiling — until you see it compounds monthly with no fixed avadhi (tenure) and, in most cases, no cap on how long the balance can run. Published rate cards from paisabazaar.com show the spread across major issuers:

| Bank | Monthly rate | Annualised |
|---|---|---|
| HDFC Bank | 1.99% – 3.75% | ~23.9% – 45% |
| ICICI Bank | up to 3.75% | ~45% |
| SBI Card | up to 3.75% | ~45% |
| Axis Bank | 1% – 3.75% | ~12.7% – 55.5% |
| Kotak Mahindra Bank | 3.50% – 3.75% | ~42% – 45% |

Two mechanics make this worse than the annualised number suggests. First, cash withdrawals carry the same or a higher rate with no grace period at all — interest accrues from the withdrawal date, plus a separate cash-advance fee of roughly 2.5%-3.5% (minimum ₹250-500) charged upfront. Second, and more damaging: the interest-free period disappears entirely the moment you pay less than the full statement amount. Pay only the minimum due, and interest is charged on your full outstanding balance from the transaction date, not the due date — including new purchases in the next cycle. That single rule is what turns a manageable-looking bill into a multi-year balance, worked through with real numbers further down.

There's also no RBI-mandated ceiling on what an issuer can charge here, unlike the competitive floor rates banks publish to win personal loan customers — card issuers set this rate largely on their own, which is a big part of why it sits so far above every other unsecured lending product in this comparison.

## Personal Loan Rates in 2026: What Banks Actually Publish

Personal loan pricing is driven by competition for your business, which is exactly why it sits so far below card debt. Published rate cards, effective 1 August 2026 and verified 23 August 2026, show:

| Bank | Rate range (p.a.) | Benchmark |
|---|---|---|
| ICICI Bank | from 9.99% | Fixed |
| Axis Bank | 9.99% – 22.00% | MCLR |
| HDFC Bank | 9.99% – 24.00% | Fixed |
| Kotak Mahindra Bank | from 10.99% | Fixed |
| State Bank of India (Xpress Credit) | 10.00% – 15.00% | MCLR |

*Compiled from each bank's own published personal loan rate pages (icici.bank.in, axis.bank.in, hdfc.bank.in, kotak.bank.in, sbi.bank.in).*

Where you land in each band comes down to your CIBIL score, income stability, and existing EMI load (your FOIR) — not a fixed number every applicant gets. Most personal loans are priced off MCLR or set as a flat fixed rate rather than the RBI's repo rate, so they don't reprice automatically the way a floating home loan does; the repo rate has held at 5.25% since it was last changed on 5 December 2025, with the next MPC review scheduled for 5-7 October 2026 (rbi.org.in), but that mainly shapes the broader lending environment rather than moving your personal loan EMI mid-tenure. Check where your own profile places you on the [Rate Predictor](/rate-predictor) before assuming you'll get a bank's advertised floor, and run the actual EMI at your quoted rate on the [Personal Loan EMI Calculator](/calculators/personal-loan-emi-calculator).

## The Middle Path: A Loan Against Your Credit Card Limit

Between a fresh personal loan and carrying card debt sits a product most cardholders don't think to ask about: a pre-approved loan against your existing credit card, disbursed as a fixed-EMI loan rather than a revolving balance. Because it draws on a limit the issuer has already underwritten you for, it's usually faster to get than a new personal loan and doesn't need a separate application — but the pricing varies more by issuer than personal loans do:

| Issuer | Rate (p.a.) | Tenure | Processing fee |
|---|---|---|---|
| ICICI Bank (Instant Loan on Credit Card) | from 11% | Up to 60 months | 1% of loan amount |
| HDFC Bank (InstaLoan / Jumbo Loan) | from 1.25%/month (~15% p.a.) | 1-5 years | Up to ₹999 + GST |
| SBI Card (Encash / Encash InLine) | 15% – 20.5%, by bureau score | 1, 2, 3, or 4 years | 2% of loan amount (min ₹499, max ₹3,000) + GST |

*Rates and terms from each issuer's own pages and current comparison data (icici.bank.in, paisabazaar.com's HDFC and SBI loan-on-credit-card pages).* SBI Card's published bands illustrate how much your bureau score moves the number even within this one product: roughly 15%-15.5% for a score above 780, 15.5%-16.5% for 700-780, and 18.5%-20.5% at or below 700.

This route genuinely sits below revolving card debt for almost anyone, but check two things first. The loan is carved out of your existing credit limit, so a large loan-on-card can leave little spending room until you repay it down. And exit costs differ sharply: HDFC's product carries a preclosure charge of roughly 3% of the outstanding principal plus GST, while ICICI's page markets a comparatively low 1% processing fee with no preclosure penalty highlighted — read your own sanction letter rather than assuming either issuer's terms apply to the other.

## The Real Math: Borrowing ₹1 Lakh for Two Years, Three Ways

Numbers make the gap concrete. Here's what ₹1,00,000 actually costs over a 24-month period across the three routes, using rates from the published bands above:

| Route | Rate (p.a.) | EMI | Total repaid | Total byaaj (interest) |
|---|---|---|---|---|
| Personal loan, strong profile | 12% | ₹4,707 | ₹1,12,976 | ₹12,976 |
| Personal loan, weaker profile | 18% | ₹4,992 | ₹1,19,818 | ₹19,818 |
| Loan against credit card, strong profile | 15% | ₹4,849 | ₹1,16,368 | ₹16,368 |
| Loan against credit card, weaker profile | 20% | ₹5,090 | ₹1,22,150 | ₹22,150 |

*EMI calculated on the standard reducing-balance formula for a 24-month tenure at each rate; figures are illustrative for a ₹1,00,000 mool rashi (principal) and will scale roughly proportionally for other amounts.*

Even at its worst (a 20% loan against a credit card for a weaker-profile borrower), this route costs roughly ₹22,000 in interest over two years. Now compare that with carrying the same ₹1,00,000 on a credit card and paying only the minimum amount due each month — a pattern the next section works through, because it isn't a simple EMI at all, and that's exactly what makes it so dangerous.

## The Minimum-Due Trap: Why Credit Card Debt Doesn't Behave Like a Loan

A personal loan and a loan against your card both have a fixed avadhi and a fixed EMI — you know exactly when the debt ends. A credit card balance has neither, and that's the core danger of treating it like a loan you're slowly paying off.

Here's the mechanic: most issuers set the minimum amount due at roughly 5% of your total outstanding (including that cycle's interest), often with a floor of ₹200-600. Pay only that, and your balance shrinks by barely more than the interest adds to it each month. Using a representative mid-range card rate of 3.5% a month (42% p.a. — within the 24%-45% band shown earlier) and a standard 5%-of-outstanding minimum due, paying only the minimum on a ₹1,00,000 balance plays out like this over five years: you'd make 60 monthly payments totalling roughly ₹1,96,800 — nearly double your original balance — and still owe approximately ₹36,300 at the end of it, having paid over ₹1,33,000 in interest alone along the way.

*This is an illustrative calculation based on a 3.5%/month rate and a standard 5%-of-outstanding minimum-due formula common across Indian card issuers, not a specific bank's published example — your own card's exact minimum-due formula and rate will change the numbers, but the shape of the trap is the same on any card charging in the 24%-45% band.*

One genuine borrower protection is worth knowing here: late payment charges are meant to apply only to the unpaid portion of your bill, not your entire outstanding amount, and your statement must disclose the annualised rate alongside the smaller-looking monthly figure. If a card balance has already reached this stage, our [personal loan debt trap guide](/blog/personal-loan-debt-trap-india-2026) and the [Debt Payoff Planner](/tools/debt-planner) are built for mapping an exit rather than continuing to pay minimums indefinitely.

## When a Credit Card Is Actually the Cheaper Option — Exceptions

None of this means a credit card is always the worse choice. It's the cheapest financing option in India, full stop, in a few specific situations.

If you can repay in full by your due date, the interest-free period means the card costs nothing beyond your annual fee — no personal loan or loan-against-card product can beat 0%. Short bridge financing over a week or two behaves similarly: even at a 42% annualised rate, ten days of exposure on a modest amount is a trivial rupee cost next to a personal loan's processing fee and paperwork lag. And some issuers offer no-cost or low-cost EMI conversion at the point of a large purchase — genuinely worth comparing against a personal loan's total cost, though it's worth checking whether that no-cost tag has been priced into a higher product price before you treat it as strictly free.

Outside these cases — any balance you expect to carry for months rather than days — the math above holds: a personal loan or a loan against your card limit will cost meaningfully less than letting a card balance revolve.

## Credit Compass Verdict

If you already know you can't clear a card bill by the due date, stop paying only the minimum and price out a personal loan the same week — even a weaker-profile personal loan at 18-20% comes in well below a revolving card balance, and the [Personal Loan EMI Calculator](/calculators/personal-loan-emi-calculator) will show you the real monthly number before you commit.

If a fresh personal loan isn't realistic on short notice — thin credit history, a pending application elsewhere, or you just need the money today — a loan against your existing credit card limit is a genuinely useful middle option, provided you compare at least two issuers' rate bands rather than accepting the first pre-approved offer your app shows you.

If you're already several months into paying only the minimum due on a card, that balance is very likely growing faster than it's shrinking; run your real numbers through the [Debt Payoff Planner](/tools/debt-planner) rather than estimating, and read our [guide to getting out of a personal loan debt trap](/blog/personal-loan-debt-trap-india-2026) for the same underlying math applied to structuring a way out.

Whichever route you pick, check where your CIBIL score actually places you before assuming a bank's advertised floor rate is yours — the [Rate Predictor](/rate-predictor) maps your profile to a realistic band using the same published bank data cited throughout this article.

## Three FAQs

**Is a loan against a credit card the same as paying off my credit card bill with a personal loan?** Not quite, though they solve a similar problem. A loan against your credit card is issued by the same bank that issued your card, drawn against your existing (or a bumped-up) credit limit, and disbursed straight to your account — no separate loan application. A personal loan used to pay off a card is a fresh loan from any bank, secured on your general creditworthiness rather than your card limit. The loan-against-card route is typically faster to get; a personal loan from a different, more competitive lender can sometimes be cheaper — compare both rate bands before choosing.

**Why does my credit card's monthly interest rate sound so much lower than the annualised figure?** Because a rate like 3.5% a month sounds small next to a personal loan's 15-18% annual figure, even though 3.5% a month compounds out to roughly 42% a year. Indian issuers are required to disclose both figures on your statement — always compare the annualised percentage rate (APR), not the monthly number, when weighing a card balance against any loan.

**Will taking a loan against my credit card limit hurt my CIBIL score?** It's reported to credit bureaus as a personal loan-type account, separate from your card's own revolving-credit reporting, so it adds to your total EMI obligations (affecting your FOIR for future loan applications) rather than directly increasing your card's utilisation ratio. It's still a credit inquiry and a new account, so expect the same short-term, minor score impact any new loan or hard enquiry carries.

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