Personal Loan vs Credit Card: Which Is Cheaper to Repay?
A personal loan is often cheaper than a credit card for the same debt, because it usually has a lower rate and a fixed end date. But it only saves money if you compare the full cost and do not run the card up again.
What is the difference between a loan and a card?
Personal loan is money you borrow in one amount and pay back in fixed monthly payments over a set time.
Credit card is a limit you can spend, repay and spend again, with a minimum payment each month.
MoneyHelper, the UK government-backed money service, says loan payments are usually a fixed amount each month. They are set so the debt is cleared by the end of the term. It notes this is not always the case with other borrowing, like credit cards.
That is the key point. A loan has a finish line. A card does not, unless you make one. (See why the minimum payment keeps you in debt.)
What should you compare?
Look at four things, not just the headline rate.
- APR. This is the yearly cost of borrowing, including fees. MoneyHelper says to compare APRs, not just interest rates. (More in APR explained.)
- Fees. Moneysmart, the Australian government’s money site, lists application fees, monthly service fees and missed payment fees to watch for.
- Term. Moneysmart says longer terms lower your payments, but you pay more interest overall.
- Early repayment. Some loans charge a fee if you pay early. Check before you sign.
One more thing. MoneyHelper says you usually won’t know the rate you get until after you apply. The advertised rate may not be your rate.
How much could a loan save you?
Say you owe €4,200 on a card at 19.9% a year. You want it gone in 24 months.
Now say you could get a loan at 8.9% APR instead. This is only an example rate. Your offer may be higher or lower.
To find the monthly payment that clears a debt in a set time, use this, in words: payment equals the balance times the monthly rate, divided by one minus (one plus the monthly rate) raised to the power of minus the number of months. The monthly rate is the yearly rate divided by 12.
Card at 19.9%
- Monthly rate: 19.9 ÷ 12 = 1.658%.
- Payment over 24 months: about €214 a month.
- Total paid: about €5,125. Interest: about €925.
Loan at 8.9%
- Monthly rate: 8.9 ÷ 12 = 0.742%.
- Payment over 24 months: about €192 a month.
- Total paid: about €4,600. Interest: about €400.
| Card at 19.9% | Loan at 8.9% | |
|---|---|---|
| Monthly payment | €214 | €192 |
| Total interest (24 months) | €925 | €400 |
The loan costs about €22 less a month and saves about €525 in interest.
That assumes the loan has no extra fees outside the APR. If it does, add them to the loan’s cost before you compare.
What is the catch?
The big risk is using the card again.
If you clear the card with a loan, the card limit is free again. If you then spend €4,200 on it and pay that off over 24 months too, you now have two debts. You pay the loan and the card together: more than €400 a month, and over €1,300 in interest.
So the loan only saves money if the card stays at zero. Some people lower their card limit or put the card away until the loan is paid.
Other things to check:
- Missed payments cost extra. Moneysmart warns you can be charged a fee if there is not enough money for a payment.
- Longer is not cheaper. Stretching the loan to make the payment smaller adds interest.
When could a card cost less?
A card can be cheaper in two cases.
- You pay it in full each month. Then you usually pay no interest at all.
- A 0% deal really covers the time you need. MoneyHelper notes 0% card deals can be a cheaper option than a loan. But it also says that outside a 0% period, you pay interest on what you still owe. (See what 0% for 12 months really means.)
If neither is true, and you carry a balance for months, compare the full cost of both.
How do you decide?
Write both options side by side. For each, note the APR, any fees, the monthly payment and the total interest over the same time.
Then ask yourself one honest question: will the card stay at zero? If the answer is no, fix that first.
Do this today (10 minutes)
- Find your card balance and yearly rate on your latest statement.
- Work out your monthly card interest: balance × yearly rate ÷ 12.
- If you look at a loan, write down its APR, fees and total cost over the same months, and compare.
Nada does this maths for you. Add your debts and see which one costs you the most each month. Get Nada
FAQ
Is a personal loan always cheaper than a credit card? No. It depends on the APR you are offered, the fees, and how long you take to repay. A loan with a lower APR is usually cheaper over the same time. But a card can cost less if you pay it in full each month, or if a 0% deal really covers the time you need.
Does a longer loan cost less? No. A longer loan gives you a smaller monthly payment, but you pay interest for more months, so the total cost goes up. Shorter terms often come with lower rates too. Pick the shortest term with a payment you can keep up every month without missing one.
Can I pay a personal loan off early? Usually yes, but check the terms first. Some loans charge a fee for paying back early. Others, often variable-rate loans, have no early exit fee. Ask the lender what it would cost to clear the loan early before you sign, so it is not a surprise later.
What if I use my credit card again after moving the debt? Then you have two debts instead of one. You pay the loan and the new card balance at the same time. In the example above, that means more than €400 a month and over €1,300 in interest. Moving debt only saves money if the card stays at zero.
Sources
Read in October 2026.
- MoneyHelper: Personal loans
- Moneysmart (Australian Government): Personal loans
- MoneyHelper: How to reduce borrowing on credit
Written by the Nada team. Reviewed October 2026.
This is general information, not personal advice.