Personal Loan vs. Credit Card
- Personal loans and credit cards allow you to borrow money, and it’s possible to qualify for both even with bad credit.
- Credit cards are typically best for everyday spending and purchases you can pay off quickly.
- Personal loans are typically best for large, one-time expenses and predictable monthly payments.
Personal loan vs. credit card: Which is better for your situation?
The best choice depends on how much money you need to borrow and how quickly you can repay it. Personal loans can be a cheaper, better option for large expenses. Credit cards are typically best for smaller purchases you can pay off quickly.
Consider a loan if…
- You need a lot of money up front. Personal loans are designed for larger purchases — you can borrow up to $100,000+ with a personal loan, while credit card limits are typically much lower.
- You want to know when you’ll be debt-free. Loans come with set repayment terms, typically from two to seven years.
- You want consistent, predictable payments. Your loan payments will be the same amount every month as long as you don’t miss payments.
- You’re worried about your spending habits. Credit cards give you ongoing access to money, and it’s easy to tap or swipe without thinking through the consequences. You’ll need to apply for more money if you use up your personal loan.
- You want lower rates. Average credit card rates are typically higher than average personal loan rates for borrowers with good to excellent credit.
Consider a credit card if…
- You need less than $10,000 and can pay off your charge quickly. You won’t spend a cent on interest if you pay off your debt as soon as your monthly payment is due.
- You qualify for a 0% intro APR credit card. You’ll need good to excellent credit, but a 0% intro APR credit card could give you several months to pay off a purchase or consolidate debt interest-free.
- You need to cover small ongoing expenses. Since credit cards allow you to borrow money and pay it off over and over again, they’re ideal for small recurring bills. Plus, you can set up autopay so you’re never late on a bill payment.
- You’re not sure how much you need. Once you take out a loan, you can’t borrow more unless you apply for another. Credit cards allow you to borrow up to your credit limit.
What’s the difference?
You can use a personal loan or credit card to borrow money instead of paying with money you already have in the bank.
With a personal loan, you’ll get a one-time payment to your bank account. You’ll pay that money back in equal monthly payments over a set period of time, typically two to seven years.
Credit cards give you access to money you can borrow and repay over and over again. Your monthly payments will be different every month as your balance fluctuates as you make purchases and pay them off, and because credit card rates change with the market.
| Personal loan | Credit card | |
|---|---|---|
| Cost | Typically cheaper for people with good to excellent credit | Typically cheaper if you pay off the balance quickly |
| Time to get money | Same day to about five business days | Same day (if issuer gives you digital card number) up to 10 business days for a physical card |
| Amount | $1,000 – $100,000+ | $1,000 – $10,000+ |
| Credit impact | Score dips about 5 points when you apply | Score dips about 5 points when you apply; credit also impacted by increased credit utilization |
| Time in debt | Typically two to seven years | None if you pay off the balance every month or up to years if you only pay the minimum |
How long will it take to get your money?
Credit cards
Credit cards are convenient — chances are you already have one in your wallet that you can use right away (assuming you haven’t hit your credit limit). If you’re applying for a new card, you can typically expect it to arrive in the mail in up to 10 business days.
Some credit card companies offer instant approval and instant card numbers to give you quick access to your money.
Personal loans
Lenders typically take one to five business days to give you your loan money. You can speed up the process by gathering documents like W-2s, identification and your mortgage or rental agreement ahead of time.
Some lenders specialize in offering emergency loans that can get you your money as soon as the same day.
Will you qualify for a loan or credit card?
You can get loans for bad credit and credit cards for bad credit, but you’ll typically pay higher interest rates and fees in either case. This makes borrowing money more expensive.
But your credit score isn’t the only factor. Lenders and credit card companies typically review your payment history, employment and income before offering you a loan or credit card. Learn more about who qualifies for personal loans based on data from thousands of real loan offers through LendingTree.
Learn about how to improve your credit fast. Boosting your score will help you save money. Raising your score from fair to very good could save you more than $4,000 with credit cards and nearly $2,000 with personal loans.
Which is cheaper? Calculate your payments
Estimate your personal loan payments
Estimate your credit card payments
Should you use a personal loan to pay off your credit cards?
Yes, it’s possible — and could save you serious money. Debt consolidation loans can help people with strong credit save $1,750 in interest on $10,000 in credit card debt, according to LendingTree research.
If you have good to excellent credit, you can also consider a 0% intro balance transfer credit card, which would allow you to pay off your debt interest-free during a promotional period.
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