Are you trying to decide between a personal loan and a credit card? It’s not an easy one, as you’ll need to consider a range of factors, such as the type of purchase, the amount of money you require and how you intend to pay it back. The answer depends on your individual circumstances and goals, but to help you out, we’ve compiled some pros and cons that generally apply.

Personal Loans:

  • Personal loans are can be more suitable for longer-term borrowings and large one-off purchases.
  • They typically offer lower interest rates than credit cards (excluding balance transfer and introductory rate card offers).
  • They are structured so that they require repayments to clear the debt within an agreed timeframe.
  • Personal loans can be used to consolidate multiple debts, provided the interest rate is lower.
  • Personal loans can offer less flexibility – they can have minimum loan terms, and some do not offer redraw options or the ability to make early repayments. In some cases, you can be charged penalty fees for extra repayments or for clearing your debt before the agreed date.
  • Interest accumulates immediately, as there aren’t interest-free days.
  • Personal loans may require an application fee or ongoing account servicing fees.
  • Some personal loans may require you secure the loan with an asset such as your car.

If you would like to read more about personal loans, head over to our Credit Knowledge Centre to learn about the basic elements of a personal loan or choosing a personal loan.

Credit Cards:

  • Credit cards may be suitable for smaller purchases and short-term borrowings.
  • Your line of credit is renewable – more credit becomes available as you repay your debt. Credit cards can offer convenience in the form of immediate cash flow.
  • Credit cards can offer interest-free periods.
  • They can be linked to a rewards program.
  • Premium cards may offer additional benefits such as complimentary insurances or access to a personal concierge service.
  • Credit cards typically have higher interest rates.
  • Balance transfer and introductory rate cards can revert to a higher interest rate after the introductory period expires.
  • Credit cards only require a minimum repayment each month. If you have a large outstanding balance and a high interest rate, it could take years to fully repay the balance.
  • Some cards come with a high annual fee.

If you’re keen on learning more about credit cards, check out our Credit Knowledge Centre to read about the basic elements of a credit card or choosing a credit card.

We hope that’s given you a good intro into some of the positives and negatives about credit cards and personal loans, but as always, please be sure to consider your individual needs and research your options thoroughly before making any decisions.


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We act as a credit intermediary and do not provide personal financial, legal or tax advice, or credit assistance of any form. Any content featured on the site is of a general and informative nature only and does not take into account your personal objectives, financial situation or needs. You should consider your needs, along with the product’s terms and conditions before making a decision. We do not accept any liability in respect of any product or service which you elect to acquire from any provider.


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