Paying your Credit Card dues on time is a good financial practice. But, missing even a single payment could land you in hot water. Once you are in debt, you’ll find that it multiplies faster than rabbits. If you find yourself struggling with debt on more than one Credit Card, and you’re considering taking out a Personal Loan to pay off your dues, you’ve come to the right place. We’ll help you find a way to deal with your situation.
Expensive Line of Credit
Credit Cards are one of the most expensive lines of credit available in the market today. The annual percentage rate (APR) for most cards hover anywhere between 30% to 40%. This could spell bad news if you’ve only been paying the minimum amount due on your Credit Card each month.
Before we proceed further, let us look into a scenario where Nilesh Gupta, a Delhi-based businessman, uses three different Credit cards. He has been repaying only the minimum amount due on each card for the last four months. He is finding it difficult to manage his finances and wants to clear all his debt. The finance charges on these cards are as follows:
| Card A | Card B | Card C | |
| Balance Outstanding (in Rs.) | 40,000 | 35,000 | 25,000 |
| Minimum amount due (5% of balance outstanding) | 2,000 | 1,750 | 1,250 |
| Interest rate (annual) | 39% | 40.80% | 37.80% |
A Credit Card Is A Loan
Using a Credit Card is like getting a loan. It isn’t free money. Every time you make a Credit Card transaction, you are borrowing money until you pay it back later—either during that month or over a period of months.
If you choose to pay the money back over time, the Credit Card Company adds interest to your account that you must pay along with the purchase amount.
If you have been paying the minimum amount due, then the interest rate will be charged (including on new purchases, if any) using the method of average daily reducing balance.
This means, if Nilesh does not repay his Credit card dues for one year (without making any fresh purchases on his card), then he will have to repay the following amount on his Credit Cards:
| Card A | Card B | Card C | |
| Balance Outstanding (in Rs.) | 40,000 | 35,000 | 25,000 |
| Minimum amount due (5% of balance outstanding) | 2,000 | 1,750 | 1,250 |
| Interest rate (annual) | 39% | 40.80% | 37.80% |
| Interest after 1 year (in Rs.) | 15,500 | 14,280 | 9,450 |
| Total dues after 1 year (in Rs.) | 55,500 | 49,280 | 34,450 |
Nilesh’s total balance outstanding as on date =Rs. 1,00,000.
His Credit Card balance outstanding after 1 year =Rs. 1,39,230.
This means he has to repay at least Rs. 1,39,230 to his Credit Card providers after one year.
In order to manage his debt wisely, Nilesh can consider the following options:
| 1 | Convert his existing Credit Card dues into easy EMIs |
| 2 | Go in for debt consolidation through a balance transfer |
| 3 | Go in for debt consolidation through a Personal Loan and repay the amount in EMIs |
| 4 | Negotiate with his Credit Card providers for a lower rate of interest |
Now let us examine these choices in detail:
Option 1: Convert existing Credit Card dues into easy EMIs
Banks might charge 18% to 24% per annum for converting Credit Card dues into easy EMIs. Opting for this option is better than carrying heavy debt with enormous interest (close to 40% per annum) on your Credit Card.
Option 2: Debt consolidation through a balance transfer
Balance Transfer means switching your Credit Card outstanding balance or dues to a new Credit Card. In other words, you can apply for a new Credit Card, which offers a balance transfer option. In this case, your new card company will pay all your previous dues to the old Credit Card Company.
People opt for a balance transfer when the Credit Card comes with a lower rate of interest on the outstanding balance as well as other benefits like an interest-free period, fixed interest rate for first 3 months or more reward points, depending on their internal guidelines.
However, you need to be careful with this scheme as there are several hidden charges to it. You can read the article on “How to use a balance transfer to cut down existing credit card debt” to know more about this option.
Generally, this option works best for those who plan to repay their debt within a few months (preferably within 3 months) and for those who do not utilise greater than 75% of their credit limit.
Before switching, always make sure you read and understand the terms and conditions of a balance transfer as well as the finance charges applicable on the new card.
Option 3: Debt Consolidation through Personal Loan:
You can choose to avail a Personal Loan to consolidate all your Credit Card dues under one umbrella. Whenever your Personal Loan gets disbursed, make sure you pay all your Credit Card dues with that amount. Start by paying the one with the highest rate of interest.
These are the pros and cons of availing a Personal Loan for the purpose of debt consolidation:
Advantages:
| (i) | All your debt will get consolidated under a single umbrella. |
| (ii) | It is easy to keep track of one credit line, rather than tracking several different Credit Cards and their payment due dates. |
| (iii) | Personal Loans have a defined tenure and lower rate of interest, it will make you more disciplined with debt payment and even help you save money in the long run. |
Disadvantages:
| (i) | If you miss your Personal Loan EMIs or default on loan repayment, then it can negatively affect your Credit Score. |
| (ii) | Getting a personal loan for a longer tenure (say 60 months) can reduce your EMI burden today, but in the long run, you might end up paying a higher amount to your loan provider. The longer the tenure, the more money you pay towards interest. |
| (iii) | Personal Loans are unsecured loans and hence carry a higher rate of interest than secured loans like loans against property, loans against gold etc. |
To get the maximum benefit from a Personal Loan, aim to pay higher EMIs for a shorter tenure without defaulting. But, before you do that, analyse your financial situation and commitments before you select this option.
Option 4: Negotiate with your Credit Card Company for a lower rate of interest
If you are unable to repay your Credit Card dues in full, then discuss the situation with your Credit Card provider before moving on to any other option. If you have genuine reasons for missing out on payments, your bank might consider your request to lower the rate of interest.
By working out a solution with your bank, you’ll save yourself from truckloads of paperwork. But, you will still need to manage multiple Credit Cards and the new rate offered can still be more expensive than that of a Personal Loan.
The above-mentioned options can be good or bad, depending on your financial situation. You need to analyse all options available and pick the one that works best for you. If taking out a Personal Loan seems to be the best option out there, then we have a host of them for you to choose from.
Need a loan of 1000000 my net take home salary is 60000 .but have credit card due of 300000 paying all due in time. This may be the reason for rejecting my personal loan
Hi Sandeep,
There are several reasons why your Personal Loan application might have been rejected. We suggest that you check your Credit Report to understand your credit history and score. Do check your eligibility before applying for any loan.
Cheers,
Team BankBazaar
Hello,
I am Pradeep Tripathi.
I hold one ICICI and CITI Bank credit cards with 55000 and 123000 outstanding respectively and since more than an year
I have not been able to repay the outstanding due to medical emergencies at home.
Now I am looking to settle these amounts by using : Debt consolidation through balance transfer, but I tried this option in SBI and HSBC, but my applications got rejected.
Please help me out so that I can settle these outstandings.
Hi Pradeep,
Thanks for writing to us. You could consider taking a Personal Loan to close your Credit Card balances. However, you need to keep in mind that your Credit Score must be good and you should also make an assessment of the rate of interest you will have to pay and your ability to repay the loan. You can also think about talking to the respective banks which issued the Credit Cards, for an amicable settlement. If you would like to check your eligibility for a Personal Loan, you can click here.
Cheers,
Team BankBazaar
Hi sir I am sunil I am using credit card of hdfc and icici but I am abile to pay amount and I want to personal loan to pay this. And get easy emi for personal loan. I am not pay before 6 month. And my cibil score is very low. No loan provide any bank.
Dear Sunil,
Thanks for wrting to us. A good Credit Score is a prerequisite for getting a Personal Loan as it is a loan given without any collateral. If you would like to check your eligibility for a Personal Loan through BankBazaar, you can click here. If you are eligible for Personal Loan from any bank, our customer service will get in touch with you. If everything goes well, you could have your Personal Loan in a couple of days.
Cheers,
Team BankBazaar
Hi
Are there any NBFC to provide personal loan for low cibil score holder. I have to clear my credit card outstanding. I get a monthly salary of Rs. 12000/-. Please help.
Hi Skygirl,
Click here to check your eligibility for a Personal Loan. If you are eligible for any loan offers, you can apply for the Loan through BankBazaar.
Cheers,
Team BankBazaar
Hi,
I have three credit cards with the total outstanding of 2.5 lak, also I’m running with personal loan and the balance in that is also around 2.6 lak. Now due to my father’s expiry I was not able to balance all the things together considering my house rent, daily expenses and medical emergencies etc. Please guide me what is the option of having all those in an single EMI. I earn 40000 per month, I already applied for an another PL for closing my credit cards and pre closure of my old loan which was rejected. Really in a critical situation and missed the Credit card payment for this month.,
Dear Dhara,
Thanks for writing to us. We are sorry to hear about your financial situation. However, running up debt in a short period of time will lead to a debt trap. If you already have too many loans, it’s unlikely that lenders will be willing to provide you with another loan. You could try talking to the credit card companies to convert your outstanding amounts into EMIs. Read this blog post for more on what to do.
Cheers,
Team BankBazaar
I am unable opt any loan due credit card outstanding due and want to clear due is there anyway to do that?
Hi Sandy,
You need to clear your dues if you wish to avail of a loan. You can start by clearing your biggest due or the one with the highest interest. You can begin by making small payments. It might take time but soon you’ll be able to clear your total outstanding balance. Also, keep a check on your spending so that outstanding doesn’t get any bigger. Once your dues are cleared, you’ll be able to get loans easily.
Cheers,
Team BankBazaar
Hi
I Need a personal loan and my credit score is 761 i want to pay my over dues credit card bills please some one help i have try so many times but loan has been rejected
Please help me out so that I can settle these outstandings.
Please call on 9871276812
Hi Vikas,
You need to first work on settling your Credit Card dues. Start by paying back small amounts and over time it will reduce. Here are a few reasons why your Loan or Credit Card application might be declined 8 Reasons you may be denied a loan or credit card. Here are some Tips To Deal With Credit Card Debt. You can consider applying for a loan once your dues are settled.
Cheers,
Team BankBazaar
Hi,
I have an outstanding debt of Rs. 75,000 on my credit card and i’ll pay off in a week. The reason is that, whenever I apply for a personal loan, it got rejected as I have outstanding balance in my card. So, after paying off my dues, how many days do I need wait for apply personal loan?
Thanks,
Lorraine Muan
Hi Lorraine,
It is best to get your Credit Report and check your Credit Score before you apply for a Personal Loan. This will help you understand whether or not your application will be rejected. A Credit Score of more than 700 is generally considered good. Here are some tips to improve your Credit Score.
Cheers,
Team BankBazaar
Dear Team ,
I have an outstanding debt of Rs. 2,00,000 on my credit card and I am unable to make the payment due to other commitments. The reason is that, whenever I apply for a personal loan, it got rejected as I have outstanding balance in my card. So, after paying off my dues, I will pay my loan, how many days do I need wait for apply personal loan?I
Thanks
Pavani
Dear Pavani,
It is not possible to give a timeline as to when your Credit Score will improve. Please check your Credit Score before applying for a Loan. Here’s a little more information about managing your Credit Score..
Cheers,
Team BankBazaar
Hi,
I have three credit cards with the total outstanding of 2.5 lak, also I’m running with personal loan and the balance in that is also around 2.6 lak. Now due to my medical expenses of my father, I was not able to balance all the things together considering my daily expenses and medical emergencies etc. Please guide me what is the option of having all those in an single EMI. I earn 40000 per month, I already applied for an another PL for closing my credit cards , which was rejected. Really in a critical situation and missed the Credit card payment for this month.,
Hi Deepak,
Sorry to hear about your situation. If the Personal Loan and Credit Card outstanding are with the same bank, you can talk to the bank and look at an one-time settlement or ask for extra time to repay the loans. For other Credit Cards, you will need to speak to the respective banks and explain your situation. You could consider a balance trasfer if it will make things easier.
Cheers,
Team BankBazaar
sir,
i want to pay all my outstanding balance on my credit card it it possible to clear balance instead of emi
Hi Srinivvasulu, You can pay off the outstanding balance on your card in one-go. However, please check with your bank for the charges involved in such a settlement.
Dear Team,
I have had a bad history with a Credit Card in the past (8 years ago), I have dues worth 38k, which was never paid off. Now that i am in a better financial position and recently have had a few Credit card approved and also a personal loan approved. MY Cibil score is close to 650.
Will repaying my OLD dues in FULL make my score jump if yes in what quantum?
Please help and advice.
Hi Shane, It’s a good idea to clear your old dues in full as soon as possible. However, don’t expect your Credit Score to improve immediately. Continue paying your present dues on time without fail and your Credit Score will improve gradually. Cheers, Team BankBazaar
Hi…
I have an HDFC and a CitiBank credit cards…
Outstanding amount is as follows: 88,000 and 1,08,000 respectively
I can afford to pay only minimum dues per month… which is generating around 5,400 and 7,000 p.m for both the cards.
I have been paying my minimum due for more than 6 months and still the actual due amount stays at 88K’s and 1.08 L…
Will it ever reduce or should I grab a personal loan to get it out?
As suggested from your answer, should I convert them into emi’s? how will emi will benefit me than personal loan?
Thanks
Hi Anaut, Each time you make only the minimum payment, you’ll be paying interest on the remaining outstanding amount. That’s why your actual due amount is still a large amount. And this cycle will continue till you start paying your total outstanding every month. A Personal Loan makes sense if you want to consolidate your debts and repay in EMIs. You can always consult a financial advisor to help you make a decision. Cheers, Team BankBazaar
HI,
I need clear my credit card dues since i have 3 card & total i am paying EMI is somewhere around 11K and my take home salary is 21300 it will credit to my bank also i work in some part time job here i am earning 6 to 7 k but i am receiving by cash , and currently i am in rented house i am planning to take house on lease to save my rent so need loan around 5 to 6 lakhs but banks are offering me only 75000 to 1 lakh is there any way to take PL please help me , and my credit score around 750 to 800 is there any chance
Hi Manjunatha AN,
It seems like you’re caught in a whirlpool of debt. It might be better to stay at your rented place until you clear your Credit Card dues. Once this is cleared, you could opt to move into a leased house. Plus your Credit Score will improve once the dues are paid. Banks decide on what about amount to give out as a loan based on certain criteria such as your income and existing debt among other things. You can check your eligibility for a Personal Loan by clicking here.
Cheers,
Team BankBazaar
Hello Sir/Madam
I have 7 credit cards of which only 2 has EMI options, total amount is INR 7.5 lacs as of today, for personal reasons all my cards has been 85-90% used. For the past 2 years I am paying back EMI on my 2 cards and minimum amount due on remianing which isn’t helping me any way.
As I live out of a charitable hostel in Mumbai and my residential address which is on rent proof is of a location in Ghaziabad, UP as we had to sell our house. I am not geting any personal loans. I have written to banks to convert my balance into EMI’s which have been declined by all 5.
How to finish off the debt, I am thinking of missing credit card payments of a few and finish all Cards one by one. I am sure it will effect my CIBIL, however I will be debt free. Or should I pay complete c\amount of my EMI cards and then go BT on EMI.
Awaiting for a hearing from your side.
Hi VijaY,
It looks like you have quite a lot of debt to manage. We suggest that you seek financial counselling on this matter. Speak to your bank and find out if they can help you chart out a plan to pay off your debt. Here are a couple of articles that might help.
Cheers,
Team BankBazaar
I have two dredit cards citi bank and RBL and i used both the cards and paying minimum amount monthly and i am in need of personal loan up to 3.5 lakh to clear my dues and some personal debts and recently i checked my CIBIL score it is 808, and my take home salary is 22000 .please sujjest me that which bank i need proceed.
Hi Vajrala Srinivas,
You check your eligibility for a Personal Loan here, Just click on the link.
All the best.
Cheers,
Team BankBazaar
Current outstanding on my personal loan with HDFC bank is Rs 7,00,000. I have loan on credit card with Citibank with the amount of Rs. 2,00,000. Take home salary is Rs 48,500.
I want to take top up of Rs 2,00,000 on my HDFC personal loan in order to pay off loan on Citibank credit card and consequently reduce my total monthly EMI, hence the top up actually would not be additional obligation over my total debt Rs 9,00,000.
Will HDFC bank consider my top up as additional obligation over current Rs 9,00,000 debt to determine eligibility? Or would it be considered as a set off against paying off my Citibank credit card loan ? These two options would change my loan top up eligibility amounts ?
Hi jit,
The bank will always take into account your present loans before deciding your eligibility. More the number of loans, the lesser will be your eligibility. We suggest that you check your eligibility before you apply for a top-up loan.
Cheers,
Team BankBazaar
Hi Team,
I have two credit cards and 40000 in SBI and 29000 in HDFC credit card. I want to settle up all these cards once for all. Personal loan isnt an option as i can see my credit score is not upto the mark which was told by paisa BAzar itself. Can you help me in giving some better solutions.
Hi Shrikant,
We understand your concern and hope to help you out. But first, you can check your Credit Score for FREE to know where you stand and if your score is poor then yes, banks will hesitate to give you a loan.
If you aren’t able to get a loan, we suggest you start repaying your Credit Card bill one at a time. Ensure you set an amount every month that goes to your Credit Card account. This way you should be able to clear your debt.
All the best.
Cheers,
Team BankBazaar
Hello,
I want to clear my credit card outstanding. Overall limit in the card is 45,000. Now it’s in negative balance of 1600. But every month i have been paying minimum due. I have checked my credit score which is above 800. Now i want to take a personal loan and repay my debt. Please advice me.
Arun.
Hi Arun A R,
Repaying your Credit Card debt will help improve your score, which in turn will make getting a Personal Loan easier. However, 800 is a good score if you are looking for a Personal Loan. Ensure that you apply for the amount your are eligible for to avoid rejection.
Cheers,
Team BankBazaar
Hello,
Thank you Team for your reply, Am looking for 50k of personal loan and my net salary is 20k. So am i eligible for this to avoid rejection.
Please advice me.
Thank you,
Arun
Hi Arun AR,
Please check your eligibility here.
Cheers,
Team BankBazaar
Hi, I received a new credit card November 2015 in order to build my credit. I made two payments December and January 2016. By February 2016 my job filed a chapter 7 bankruptcy. I was unemployed for almost a year. I called the card company and tried to explain. But,they weren’t much help. The amount went into collections. It marked as charged off. I wanted to ensure all collections on my credit is removed, I had been ripped off by this so called credit companies (CRS and Lexington law) It was the horrible moment of my life. Few months later I saw many reviewed on Youtube how this professional with decades of experience had helped them repair their credit. I contact him and explained my credit issues to him he explained how he will get it done and asked for some of my details after we both agreed on a deal. Right now all collection on my report have been eliminated and my score has improved to excellent. The point for this write up is, I know many out there will had also been deceived or scammed by this credit companies but I want to tell you the only solution to your credit issues is to hire an individual expert like the one I hired (captainspyhacker2 @gmailcom), he put the interest of his client first, treat them like a family and go beyond his perimeter to get it done
Hi Lawrence,
Thanks for the insight. Quite fascinating.
Cheers,
Team BankBazaar
Keeping your debt at a manageable level is one of the foundations of good financial health.
Great and informative article indeed! Thank you so much for sharing this one with me.
Hi Alan Chapman,
Thank you very much for writing in. Glad you enjoyed it. Keep reading for more insights.
Cheers,
Team BankBazaar
Hello,
My bankbazaar credit score shows 782.
Can i apply for PL??
BOTH OF MY CARD OUTSTANDING IS IN EMI, THAT I PAY, BUT I NEED TO PRECLOSE BOTH.
AND 782 SCORE IS GOOD OR BAD, AS OF ACTUAL CIBIL SCORE, BECAUSE IT IS EXPERIAN, NOT ACTUAL CIBIL.
THANKS IN ADVANCE
Hi Siddharth Dhawan,
You can check your eligibility for a Personal Loan by clicking on this link. However, do know that granting a Personal Loan is purely at the discretion of the bank.
Cheers,
Team BankBazaar
i have overdue of 4 EMIs of my car loan is it possible to get a loan to pay off all existing debts at this stage
Hi Rakesh,
Thanks for getting in touch. We’re so sorry to hear that you’re having trouble paying your Car Loan EMIs. Yes, you can try taking a loan at a lower interest to pay off your current outstanding balance. However, because you have already missed 4 payments in a row, it might be difficult for you to qualify for a new loan.
Therefore, we suggest that you get in touch with the bank from which you have taken the Car Loan. Inform the lender about the unavoidable circumstances that are preventing you from paying your EMIs on time. Your genuine intention to pay off the loan might work in your favour and the concerned bank might suggest you a couple of options for loan repayment.
We hope this helps!
Cheers,
Team BankBazaar
I am planning to take personal loan to clear my credit card dues, and If I make credit card payment of 4.5 lacs through online transaction.
Is there any chance that Income tax department will send me notice for such transaction?
Hi Shrikant,
Taking a loan to clear another loan is not a good idea. We would advise you to not take a Personal Loan to clear your Credit Card dues. If you need cash to clear your debts, it’s better to borrow from your friends or family and then pay them back when your situation improves.
Hope this helps.
Cheers,
Team BankBazaar