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

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

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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.

Credible Personal Loans

Our top pick: Credible

Quickly get personal loan offers from top online lenders.

  • Minimum Loan Amount: $1,000
  • Maximum Loan Amount: $100,000
  • Loan Terms: 2 to 7 years
  • One simple form
  • Must have good to excellent credit

    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 loan Credit card
    Interest rate Generally 2.99%-36.00% Generally 13.99% to 22.99%
    Repayment terms Monthly Monthly
    Borrowing limit Can be up to $100,000 Can be as high as $50,000
    Funds disbursement One lump sum upon approval Revolving credit on card
    (cash advances available as well)

    Compare personal loan lenders and credit card providers

    Rates last updated December 19th, 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.
    550
    $100,000
    3.84% to 35.99% (fixed)
    Credible Personal Loans
    Get personalized rates in minutes and then choose a loan offer from several top online lenders.
    Good to excellent credit
    $100,000
    4.99% to 36% (fixed)
    LendingClub Personal Loan
    A peer-to-peer lender offering fair rates based on your credit score.
    640
    $40,000
    6.95% to 35.89% (fixed)
    Monevo Personal Loans
    Quickly compare multiple online lenders with competitive rates depending on your credit.
    550
    $100,000
    3.34% to 35.99% (fixed)
    NetCredit Personal Loan
    Check eligibility in minutes and get a personalized quote without affecting your credit score.
    550
    $10,000
    34% to 155% (Varies by state) (fixed)
    SoFi Personal Loan Fixed Rate (with Autopay)
    No fees. Multiple member perks such as community events and career coaching.
    680
    $100,000
    7.24% to 15.24% (fixed)
    Marcus by Goldman Sachs Personal Loans
    Consolidate your debt or pay off large expenses with competitive rates and no fees.
    Good to excellent credit
    $40,000
    6.99% to 24.99% (fixed)
    OneMain Financial Personal and Auto Loans
    An established online and in-store lender with quick turnaround times. Poor credit is OK.
    Varies
    $30,000
    16.05%–35.99%* (fixed)
    Avant
    Conveniently check your loan options without affecting your credit score.
    580
    $35,000
    9.95% to 35.99% (fixed)

    Compare up to 4 providers

    Name Product Filter values Annual Fee APR for Purchases (Purchase Rate) Intro APR for Balance Transfer
    $0
    16.99% to 25.74% variable
    0% for the first 15 months (then 16.99% to 25.74% variable)
    0% intro APR for 15 months from account opening on purchases and balance transfers.
    $0
    14.99% to 25.99% variable
    0% for the first 15 months (then 14.99% to 25.99% variable)
    Earn a $150 bonus statement credit after you spend $1,000 on purchases in the first 3 months. Rates & Fees
    $0
    16.99% to 25.74% variable
    0% for the first 15 months (then 16.99% to 25.74% variable)
    0% intro APR for 15 months from account opening on purchases and balance transfers.
    $0 annual fee for the first year ($95 thereafter)
    17.99% to 24.99% variable
    Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months.
    $95
    14.99% to 25.99% variable
    0% for the first 12 months (then 14.99% to 25.99% variable)
    Earn $200 bonus cash back after you spend $1,000 on purchases in the first 3 months. Rates & Fees
    $0
    14.99% to 25.99% variable
    0% for the first 15 months (then 14.99% to 25.99% variable)
    Earn up to $250 back. Earn $150 back after you spend $1,000 or more in purchases with your new card within the first 3 months of card membership. Plus, earn an additional $100 back after you spend an additional $6,500 in purchases within your first 12 months. Rates & Fees
    $450
    17.99% to 24.99% variable
    Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months.
    $550
    None (Charge Card)
    Get 5x Membership Rewards® points on flights booked directly with airlines or with American Express Travel and 5x points on eligible hotels booked on amextravel.com. Rates & Fees
    $0
    13.99% variable
    0% for the first 15 billing cycles (then 13.99% variable)
    A low, variable APR on purchases, balance transfers and cash advances.
    $0 annual fee for the first year ($89 thereafter)
    17.99%, 21.99% or 24.99% variable
    0% for the first 12 months (then 17.99%, 21.99% or 24.99% variable)
    Enjoy 70,000 bonus miles after spending $5,000 on purchases in the first 90 days.
    $0
    14.99%, 18.99% or 24.99% variable
    0% for the first 15 months (then 14.99%, 18.99% or 24.99% variable)
    Earn unlimited 1.5% cash rewards on purchases. See Rates and Fees.
    $0
    12.99%, 16.99% or 20.99% variable
    0% for the first 18 months (then 12.99%, 16.99% or 20.99% variable)
    An 18 months 0%% Intro APR period on both purchases and balance transfers, plus zero foreign transaction fees, makes this is a strong well-rounded card. See Rates and Fees
    $0
    16.24% to 22.24% variable
    1.99% for the first 6 monthly billing cycles (then 16.24% to 22.24% variable)
    1% cash back to the nonprofits, K-12 schools, colleges and religious organizations of your choice.
    $0
    17.74% to 26.74% variable
    Earn 10,000 bonus miles after spending $500 in purchases on your new card in your first 3 months of card membership. Rates & Fees
    $0 annual fee for the first year ($95 thereafter)
    17.74% to 26.74% variable
    30,000 bonus miles after you use your new card to make $1,000 on purchases within the first 3 months. Rates & Fees
    $0 annual fee for the first year ($95 thereafter)
    17.74% to 26.74% variable
    Enjoy a $0 annual fee on the first year and earn up to 2 Starpoints® for every dollar of eligible purchases. Rates & Fees
    $95
    17.74% to 26.74% variable
    Earn 125,000 Hilton Honors™ Bonus Points after you spend $2,000 or more in purchases with your new card within the first 3 months of card membership. Rates & Fees
    $0
    17.74% to 26.74% variable
    Earn 75,000 Hilton Honors™ Bonus Points after you spend $1,000 in purchases on the card within your first 3 months of card membership. Rates & Fees
    $495
    16.99% variable
    0% for the first 15 billing cycles (then 16.99% variable)
    Receive an annual $100 air travel credit toward flight-related purchases including airline tickets, baggage fees, upgrades and more.
    $195
    16.99% variable
    0% for the first 15 billing cycles (then 16.99% variable)
    Enjoy unique excursions, privileged access to exclusive events and insider opportunities.
    $995
    16.99% variable
    0% for the first 15 billing cycles (then 16.99% variable)
    Earn points every time you spend. Luxury Card enhances your purchasing power by providing you with one (1) point for every one dollar ($1) you spend. Every purchase gets you closer to the rewards you want.
    $75 annual fee for the first year ($99 thereafter)
    23.9% variable
    The Indigo® Platinum Mastercard® Credit Card is specifically designed for those with less than perfect credit.
    $75 annual fee for the first year ($48 thereafter)
    29.99% fixed
    The First Access Card is a true VISA® credit card that does not require perfect credit for approval.
    Up to
    19.99% to 25.99% variable
    Get 1% cash back rewards on eligible purchases including gas, groceries, and services such as mobile phone, internet, cable and satellite TV, terms apply.
    $35
    19.39% variable
    A secured Visa® credit card that helps you build your credit quickly.

    Compare up to 4 providers

    Benefits and drawbacks of a personal loan

    Benefits

    • 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

    Drawbacks

    • 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

    Benefits and drawbacks of a credit card

    Benefits

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

    Drawbacks

    • 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

    A road that is divided into a personal loan option vs a credit card optionPersonal 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.

    How interest is calculated: Credit card vs. personal loan

    Credit cards and personal loans might both come with APRs. But it doesn’t quite work the same way. With a personal loan, you’ll typically pay a percentage of your loan principal in interest each month — this amount can vary, especially if your loan is amortized.

    With a credit card, you can effectively avoid paying interest if you’re able to pay off your balance each month. You’ll only pay interest when you have a balance that takes more than a month to pay off — which can take less time than a personal loan. So while credit card rates might be higher, they also come with the option of completely avoiding interest payments.

    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.

    Frequently asked questions

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    US Personal Loans Offers

    Important Information*
    Credible Personal Loans

    Get personalized rates in minutes and then choose a loan offer from several top online lenders.

    Even Financial Personal Loans

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

    LendingClub Personal Loan

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

    SoFi Personal Loan Fixed Rate (with Autopay)

    No fees. Multiple member perks such as community events and career coaching.

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    US Personal Loans Offers

    Important Information*
    Credible Personal Loans

    Get personalized rates in minutes and then choose a loan offer from several top online lenders.

    Even Financial Personal Loans

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

    LendingClub Personal Loan

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

    SoFi Personal Loan Fixed Rate (with Autopay)

    No fees. Multiple member perks such as community events and career coaching.

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