Skip to content
CredsirCredsir
Ranked

Debt Consolidation Loans

Consolidating credit card debt into a personal loan is one of the few pieces of financial advice that is almost unconditionally correct on the arithmetic: cards revolve at roughly 42% annualised, personal loans at 11–18%.

Typical rate gap: card vs consolidation loan
≈ 24 – 30percentage points

Card revolving cost ~42% p.a. against personal loans from ~12%.

as of 2026-08-15· Issuer tariff schedules and lender rate cardsreported

The condition is behavioural, not mathematical — it only works if the cards stay paid off afterwards.

By Nishit Kumar, Founder & Editor
Updated 17 August 2026

Beyond the table

Work a real case. ₹4 lakh revolving on cards at 3.5% a month costs about ₹14,000 a month in interest alone, and the balance barely moves if you pay only the minimum. The same ₹4 lakh as a three-year personal loan at 13% costs roughly ₹13,500 a month in total — and clears completely in 36 months. Same outgo, one ends.

The failure mode is well documented and worth naming: the cards are consolidated, the limits stay open, and within a year they carry a balance again — now alongside the loan EMI. If you consolidate, reduce the card limits at the same time. Not closing them entirely, which hurts your utilisation ratio and credit history length, but reducing them enough that the balance cannot rebuild.

Your numbers

₹1.5 L
₹0₹1,50,000₹5 Cr
042%60
₹4 L
₹0₹4,00,000₹5 Cr
014%40
₹1,000₹25,000₹50 L
Debt-free in
2 yr 3 mo
Total debt
₹5,50,000
Avalanche (highest rate first) — interest
₹1,08,015
Snowball (smallest balance first) — interest
₹1,08,015
Avalanche saves
₹0
Monthly payment
₹25,000

What this means.Avalanche is mathematically optimal — attack the 42% debt first and save ₹0. Snowball clears a debt sooner, which some people need psychologically. Either beats paying minimums.

Questions

Is debt consolidation a good idea?

On the numbers, yes, when it replaces credit card debt at roughly 42% annualised with a personal loan in the low teens. It fails when the freed-up card limits are used again, which converts one debt into two. Reduce the limits at the point of consolidation.

Will consolidating my debt hurt my credit score?

Short term, slightly — a new loan is a hard enquiry and a new account. Medium term it usually helps, because paying down revolving card balances sharply reduces your credit utilisation ratio, which carries significant weight in the score.

Should I close my credit cards after consolidating?

Usually not entirely. Closing cards reduces your total available limit, which raises your utilisation ratio, and closing an old card shortens your credit history. Reducing the limits achieves the discipline without the score damage.

Related reading

Sources

Every figure on this page is traced to the document it came from. Where a claim rests on a regulator or an institution’s own rate card, that is the link below — not a summary of it.

  1. [2]Understanding your CIBIL score and report— TransUnion CIBILPrimary
Worth knowing.Rates, fees and terms change frequently and vary by applicant. Everything here is general information, not personalised advice. Confirm the current terms directly with the institution before you apply. How we research and rate.