Compare personal loans vs. credit cards: Which has better rates?

What’s the difference between a personal loan and a credit card?

Credit card or personal loan? The answer depends on what you’re buying and how you intend to pay it back.

When you’re in the market to make a major purchase but don’t have all the cash on hand, borrowing funds can be a viable route. It usually comes down to two options: credit cards and personal loans. Both have pros and cons, but choosing the one that best suits your financial situation could save you money in the long run.

Prosper

Personal loans through Prosper

You could borrow up to $35,000 for a variety of purposes, with rates from 5.99%–35.99%%.

  • Recommended Credit Score: 640 or higher
  • Minimum Loan Amount: $2,000
  • Maximum Loan Amount: $35,000
  • Loan Term: 3 or 5 years
  • Turnaround Time: 1-3 business days
  • Simple online application process
  • No prepayment penalties

    How do personal loans and credit cards work?

    Personal loans and credit cards are both types of credit that you have to repay with interest. However, there are some differences between the two.

    • Personal loans come in a lump sum. You have a predetermined amount of time to pay them off, usually between one and seven years. On top of interest, you might also have to pay application, origination, monthly or prepayment fees.
    • Credit cards are a revolving form of borrowing, so they can theoretically last a lifetime. There’s a cap on how much you can borrow each month and you have to make at least a minimum monthly payment on your balance. Many credit cards charge annual fees but also come with interest-free grace periods, balance transfers and rewards.

    Main differences between personal loans and credit cards

    Personal loanCredit card
    Interest rateGenerally 2.19%-36.00%Generally 13.99% to 22.99%
    Repayment termsMonthlyMonthly
    Borrowing limitCan be up to $100,000Can be as high as $50,000
    Funds disbursementOne lump sum upon approvalRevolving credit on card
    (cash advances available as well)

    Compare personal loan lenders and credit card providers

    Rates last updated February 25th, 2018

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    Unfortunately, none of the personal loan providers offer loans for that credit score. If you are in urgent need of a small loan, you might want to consider a short term loan.
    Name Product Product Description Min. Credit Score Max. Loan Amount APR
    Even Financial Personal Loans
    Get connected to competitive loan offers instantly from top online consumer lenders.
    580
    $100,000
    From 4.99% (fixed)
    LendingClub Personal Loan
    A peer-to-peer lender offering fair rates based on your credit score.
    660
    $40,000
    From 5.99% (fixed)
    CompareFirst Personal Loans
    An easy-to-use loan connection service geared toward introducing first-time borrowers to affordable personal loans.
    580
    $100,000
    From 2.99% (fixed)
    Upgrade Personal Loans*
    620
    $50,000
    From 5.96% (fixed)
    Laurel Road Personal Loans
    Get a personal loan with no application or origination fees and a rate discount for autopay.
    680
    $45,000
    From 5.5% (fixed)
    FreedomPlus Personal Loans
    Consolidate debt and more with these low-interest loans. Cosigners welcome.
    640
    $35,000
    From 4.99% (fixed)
    Best Egg Personal Loans
    640
    $35,000
    From 5.99% (fixed)
    Prosper
    Borrow only what you need for debt consolidation, home improvements and more — with APRs based on overall creditworthiness.
    640
    $35,000
    From 5.99% (fixed)
    LendingPoint Personal Loans
    Get a personal loan with reasonable rates even if you have a fair credit score in the 600s.
    600
    $25,000
    From 15.49% (fixed)
    NetCredit Personal Loan
    Check eligibility in minutes and get a personalized quote without affecting your credit score.
    550
    $10,000
    From 34% (fixed)

    Compare up to 4 providers

    Rates last updated February 25th, 2018
    Name Product APR for Purchases ( Purchase Rate ) Intro APR for Balance Transfer Annual fee Product Description
    Barclaycard Arrival Plus® World Elite Mastercard®
    17.24%, 21.24% or 24.24% variable
    0% Intro APR for 12 months (with whichever is greater: $5 or 3% balance transfer fee)
    $0 annual fee for the first year ($89 thereafter)
    Enjoy 40000
    bonus miles after you spend on purchases in the first 90 days — that's enough to redeem for a $400 travel statement credit toward an eligible travel purchase.
    Luxury Card Mastercard® Titanium Card™
    16.24% variable
    0% Intro APR for for the first 15 billing cycles (with whichever is greater: $5 or 3% balance transfer fee)
    $195 ($95 for each Authorized User added to the account)
    Enjoy unique excursions, privileged access to exclusive events and insider opportunities.
    HSBC Gold Mastercard®
    12.24%, 16.24% or 20.24% variable
    0% Intro APR for first 18 months from account opening (with whichever is greater: $10 or 4% balance transfer fee)
    $0
    An 18-month 0% Intro APR period on both purchases and balance transfers, plus zero foreign transaction fees, makes this is a strong well-rounded card.
    Indigo® Platinum Mastercard® Credit Card
    23.9% variable
    $75 annual fee for the first year ($0 to $99 thereafter)
    With this card you get a 23.9% variable APR.
    Barclaycard Ring™ Mastercard®
    10.24% variable
    $0
    A low, variable APR on purchases, balance transfers and cash advances.
    Credit One Bank® Visa® with Free Credit Score Tracking
    17.24% to 25.24% variable
    $0 to $75 first year annual fee for the first year ($0 to $99 thereafter)
    Get 1% cash back rewards on eligible purchases including gas, groceries, and services such as mobile phone, internet, cable and satellite TV, terms apply.
    Credit One Bank® Unsecured Platinum Visa®
    19.15% - 25.24% variable
    $0 to $75 first year annual fee for the first year ($0 to $99 thereafter)
    Give your credit a boost with credit line increase opportunities, a fee may apply.
    The First Access VISA® Credit Card
    29.99% variable
    $75.00 for first year. After that, $48.00 annually.
    Access credit even if you have poor or limited credit history.
    Simmons Bank Visa® Platinum
    9.25% variable
    $0
    The Simmons Bank Visa® Platinum Card offers multiple perks, including one of the lowest available APRs on the market.
    Credit One Bank® Unsecured Visa® with Free Credit Score Tracking
    19.15% - 25.24% variable
    $0 to $75 first year annual fee for the first year ($0 to $99 thereafter)
    Get 1% cash back rewards on eligible purchase, terms apply.
    Simmons Bank Visa® Platinum Rewards
    11.25% variable
    $0
    Excellent Credit Required - Applicants that do not have excellent credit will not be approved

    Compare up to 4 providers

    Pros and cons of a personal loan

    Pros

    • Lower interest rates than credit cards
    • Repayment schedule means your debt comes with an end date
    • Can be cheaper in the long term
    • No temptation to overspend

    Cons

    • Minimum loan term means that you’ll carry the debt for more than a year
    • Can be inflexible (may not offer early repayments)
    • Can take longer to apply for

    Suitable for

    • Large one-off purchases like cars or home improvement
    • Large debt consolidations
    • Borrowing over a long period of time

    Pros and cons of a credit card

    Pros

    • Immediate spending
    • Can come with rewards
    • Convenient option if you need a constant cash flow
    • Balance transfer for debt consolidation
    • Interest-free grace period

    Cons

    • Usually carry higher interest rates
    • Only requires a minimum repayment each statement period, which means your debt can accrue interest indefinitely

    Suitable for

    • Smaller purchases
    • Small debt consolidations
    • Everyday shopping or retail purchases to earn reward points
    • Spending amounts that you can be paid back within the interest-free introductory period

    personal-loan-vs-credit-card2Personal loans vs. credit cards: Which one is right for you?

    There is no single answer to this question. While a credit card might be the right choice in one situation, a personal loan might be more suitable in another, and in a third situation, neither might be appropriate. Here are some questions to ask to help decide which credit product might best meet your needs:

    • What do you need the funds for? If you need money for a one-off expense, such as a large purchase, then a personal loan may be suitable. If you want continued access to credit, then a credit card may be more suitable.
    • How do you manage your repayments? As mentioned in the point above, credit cards are an ongoing form of credit, while personal loans have an end-date. If either a personal loan or credit card will work for your needs, you may want to consider how disciplined you are with repayments. If you think you may be tempted with the credit line sitting there, then a more structured repayment schedule, such as that offered by a personal loan, may be worth considering.
    • Are you consolidating debt? It’s important to consider your options carefully. How much debt do you have and does it include loans and credit card accounts? Make sure you will be able to bring across all your accounts to consolidate – for instance, only certain providers allow you to balance transfer loans to a credit card. You also have the option of consolidating your credit card to a personal loan, which can help you save.
    • How much are you looking to borrow? Credit card limits differ, as do personal loan limits. Generally, with an unsecured personal loan you can apply for up to $100,000. You may be able to a high credit limit with a credit card but you will generally need to meet stricter eligibility criteria.

    How to compare personal loans and credit cards

    • Interest rates. If you compare interest rates, generally personal loans are cheaper. The true cost is reflected in the APR, as you need to consider any fees as well.
    • Fees. Personal loans may come with an application fee or origination fee, among other fee types. Credit cards usually just have the annual fee, if there’s a fee at all.
    • Your financial situation. If you have good control over your spending and you regularly follow your budget, then a credit card could be suitable and even help you earn money through rewards and cash back. On the other hand, a personal loan offers the structure some people may need to repay debt timely.

    Using a personal loan or credit card to consolidate debt

    Debt consolidation involves merging multiple debts into one loan or credit card. It simplifies your monthly payments and could save you money if you find a lower interest rate. There are two main ways to do this: With a debt consolidation loan or a balance transfer credit card.

    • Debt consolidation loans are term loans used to pay off any kind of debt at a lower interest rate. Your lender either gives you the money to pay off your debt, or — more likely — asks for your payment information to do it for you.
    • Balance transfer credit cards allow you to transfer all of credit card debt to onto a new card with a lower rate. They usually charge a one-time transfer fee, on top of annual fees, and often offer introductory rates that can be as low as 0%.

    Bottom line

    Personal loans and credit cards are two forms of borrowing that both offer attractive benefits and some notable drawbacks. Which you choose is ultimately up to you, and many people have used both at different points for different purposes. Be sure to compare your options to make an informed decision.

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    US Personal Loans Offers

    Important Information*
    Even Financial Personal Loans

    Get connected to competitive loan offers instantly from top online consumer lenders.

    Prosper

    Borrow only what you need for debt consolidation, home improvements and more — with APRs based on overall creditworthiness.

    LendingClub Personal Loan

    A peer-to-peer lender offering fair rates based on your credit score.

    SoFi Personal Loan Fixed Rate (with Autopay)

    Borrow up to $100,000 with a competitive APR and no fees.

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