Personal Loan vs Credit Card Loan – Which Is More Expensive?

Both personal loans and credit card loans give you access to funds when you need them, but they work very differently — and one is dramatically more expensive than the other. Understanding the cost difference can save you thousands of rupees in interest.

The Cost Difference is Massive

Credit cards in India charge interest rates of 30-48% per annum on revolving balances — the amount you carry beyond the due date. Personal loan rates, by contrast, range from 10-24% per annum. If you carry a balance of ₹1 lakh on your credit card for one year, you could pay ₹30,000-48,000 in interest. The same amount as a personal loan at 14% would cost around ₹14,000 in interest over one year — roughly one-third the cost.

How Credit Card Interest Works

Credit cards offer an interest-free period (typically 18-45 days) if you pay your bill in full by the due date. The moment you carry any balance forward, interest is charged on the full outstanding amount from the transaction date — not from the due date. This means a purchase made on day 1 of your billing cycle could accrue 50+ days of interest if not paid in full.

Many cardholders fall into the minimum payment trap. Paying only the minimum (usually 5% of the outstanding balance) keeps your account active but results in compounding interest that can double your debt within 2-3 years.

When a Credit Card Loan Makes Sense

Credit card loans (also called credit card personal loans or card loan conversion) are different from revolving credit card debt. Most issuers offer a loan against your credit card limit at a fixed interest rate of 12-18% p.a., much lower than the revolving rate. These are legitimate options for amounts under ₹5 lakh, with the advantage of no additional documentation and instant disbursal through your card issuer's app.

When a Personal Loan is Better

For any amount above ₹1 lakh, a personal loan is almost always the cheaper option. Personal loans offer lower interest rates, fixed repayment tenures, and a clear end date. They also help build your CIBIL score through regular monthly payments, unlike credit card balances that can signal high utilisation and risk to lenders.

Comparison Table

The Bottom Line

If you need to borrow money, a personal loan is almost always cheaper than carrying credit card debt. The only exception is if you can pay the credit card balance in full within the interest-free period — in which case it costs nothing. For any medium-to-long-term borrowing need, a personal loan is the financially smarter choice.