Personal Loan for Debt Consolidation
Replace costly credit card dues and multiple small loans with one cheaper EMI — the maths and the traps.
Updated 30 September 2026 · 8 lenders trackedWhat you need to know
Revolving credit card balances typically cost several times more than a personal loan. Using a personal loan to clear them — and several small loans — can cut interest sharply and simplify repayment into one EMI, provided you stop building up new card debt.
Card dues vs personal loan
| Repaying ₹3 lakh over 3 years | EMI | Interest | Fee incl. GST | Total cost |
|---|---|---|---|---|
| Credit card dues (3.5% a month ≈ 42% p.a.) | ₹14,785 | ₹2,32,269 | ₹0 | ₹2,32,269 |
| Personal loan @ 13% + 2% fee | ₹10,108 | ₹63,895 | ₹7,080 | ₹70,975 |
| Personal loan @ 16% + 2% fee | ₹10,547 | ₹79,696 | ₹7,080 | ₹86,776 |
Illustration: card interest assumed at 3.5% a month on revolving balances; actual card rates vary. The saving only holds if you stop running up new card balances.
Steps
- List all debtsOutstanding, rate and EMI for each card and loan.
- Check foreclosure costsSome loans charge 2% – 5% to close early.
- Borrow only what you needEnough to clear the costliest debts.
- Pay lenders directlyClose each card balance and loan; get closure letters.
- Keep cards unused or reduce limitsAvoid building a new balance.
When it does not help
- If the new loan’s APR is not much lower than your existing debts
- If foreclosure charges on existing loans cancel out the saving
- If the underlying spending does not change
Frequently asked questions
Will consolidation hurt my credit score?
There is a small, temporary dip from the new enquiry and account, but lower card utilisation and on-time EMIs usually improve the score over time.
For information and comparison only. Loan terms, rates and rules change — confirm with the lender and read the Key Facts Statement before borrowing.