High interest rates and the minimum payment trap can make credit card debt more costly than a larger personal loan, prompting experts to recommend repaying the most expensive borrowing first.
When debt begins to pile up, the size of the loan is not always the best guide to what should be repaid first. Financial specialists quoted by TV9 Hindi say the smarter approach is to look at the cost of borrowing, the repayment structure and the impact on credit standing rather than simply focusing on the larger number. In practice, that often means dealing with credit card balances before personal loans, even when the card bill is smaller.
The reason is simple: credit card debt is usually far more expensive. TV9 Hindi cites experts including Raj P Narayanan, founder and executive chairman of ZAGGLE, and Kapil Makhija, founder and chief operating officer of Mini EMI, who say personal loans in India typically carry annual interest of roughly 12% to 18%, while revolving credit card balances can attract charges of about 36% to 42% a year. Independent comparisons by OnePaisa and other finance websites put credit card interest even higher in some cases, making card debt one of the costliest forms of consumer borrowing. That gap means a Rs 2 lakh card bill can become more burdensome than a Rs 5 lakh personal loan if the card balance is left untouched.
A second danger is the minimum payment trap. Paisabazaar explains that paying only the minimum amount due keeps the account in good standing, but it does not meaningfully reduce the principal. Interest continues to accrue on the unpaid balance, and in many cases on fresh purchases as well, which can keep the debt alive for far longer than borrowers expect. TV9 Hindi quotes Makhija as warning that making only the minimum payment can create a cycle that becomes increasingly difficult to escape.
Credit scores add another layer to the decision. According to Paisabazaar, repeatedly carrying a high card balance can signal heavy reliance on borrowed money and may weigh on a credit profile, even if payments are made on time. By contrast, personal loan instalments paid punctually generally reflect stable repayment behaviour and can support a stronger credit history. In other words, it usually makes sense to keep personal loan EMI payments current while directing extra cash towards the credit card balance.
The most practical strategy is to free up as much monthly surplus as possible and throw it at the highest-cost debt first. TV9 Hindi says bonuses, tax refunds or any unexpected income should also be used to reduce the card balance quickly. If the bill is too large to clear at once, a lower-rate EMI conversion or a debt consolidation route may reduce the pressure and limit the damage from high interest. The broader lesson from the comparisons is clear: when faced with both debts at once, the most expensive borrowing should usually be tackled first, not the largest by amount.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
