How to Decide Between a Personal Loan or Credit Card


Are you in need of a cash boost but you’re unsure whether to opt for a personal loan or a credit card? Both have their own pros and cons to consider, making it difficult to know which is right for you.

To help, here you’ll discover the pros and cons of both options and where each is better used.

The pros and cons of a personal loan

Personal loans are supplied on a secure or unsecured basis. They tend to have quite reasonable interest rates, depending upon your personal circumstances. Secured loans do tend to have much lower interest rates, but they do come with an increased risk. For example, if you were unable to make the repayments of the loan, you could end up losing your home.

The pros of a personal loan include:

  • They’re great for larger borrowing
  • You pay off a good amount each month
  • Lower interest rates than credit cards

So, if you’re looking to take out a large lump sum to buy a new car or consolidate your debts, personal loans are much better than credit cards. With a personal loan through Ocean Finance for example, you can take out up to £10,000. With a credit card, most start you off with up to £3000.

The cons of personal loans include the fact they’re much harder to get these days compared to credit cards. You also aren’t provided any additional protection on any goods you spend the money on.

The pros and cons of a credit card

Credit cards are definitely a convenient way to borrow the cash that you need. You can use them as and when you need them, making them especially great during times of emergencies. The main pros of credit cards include:

  • They’re better for smaller cash borrowing
  • They provide protection on goods purchased
  • Low monthly repayments

Compared to loans, the amount you need to pay back each month is much lower with a credit card. However, the flip side of this is that you do need to be very disciplined to pay off your balance. They also provide a regular line of credit. Once you’ve paid the balance off, it’s ready to use again. The interest rates do tend to be higher however and it’s much easier to run into financial difficulties with a credit card too.

These are the main pros and cons of credit cards and loans. The one that’s right for you will depend upon how much you want to borrow and how good your credit rating is.