Managing ₹2 lakh in credit card dues alongside a ₹5 lakh personal loan is stressful. Experts said, "Clear the smaller card debt in full first." High interest on cards compounds quickly, hurting your credit score. Always pay your personal loan EMIs on time while using extra funds to clear cards.
Having ₹2 lakh in credit card dues and a ₹5 lakh personal loan can put pressure on an individual's monthly budget. However, when deciding which debt to clear first, the outstanding amount alone should not determine your repayment strategy, as applicable interest rate, repayment terms and their influence on your credit score and overall credit profile also matter.
In most cases, clearing high-interest credit card-related dues first can go a long way in helping reduce the overall borrowing burden, provided you also continue to clear your pending personal loan EMIs on time.
The focus of borrowers, therefore, should be on avoiding delays or defaults in such situations to prevent financial complications, psychological stress, and legal ramifications.
He added, "In their mind, the 5% is paid, and they have done their part, while the balance quietly compounds at 40%. So yes, clear the smaller card debt in full first. The score effect is also unequal: a maxed card drags your score through high utilisation every month, while a personal loan paid on time actually builds it. Keep the loan EMI running as scheduled, put every spare rupee into the card, and if the surplus is small, convert the card dues into an EMI at a lower rate instead of revolving."
Borrowers should avoid relying solely on minimum payments, compare lower-cost repayment options and ensure that they direct any additional funds, bonuses or savings towards reducing the costliest outstanding balance. The focus should be on the most expensive form of debt, i.e., the ₹2 lakh credit card debt that can compound quickly. This approach ensures that the overall debt level remains in check and that the individual credit score and credit profile remain sound.