Credit card vs personal loan
Credit cards may be better for short-term, smaller purchases, while personal loans can be more suitable for larger, planned expenses.
Which one to go for will depend on your individual circumstances, and what you need the money for.
Learn more about:
Benefits of a credit card
Credit cards are a line of credit that offer:
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Flexible repaymentsFlexible repayment options are available with a credit card – from paying off 5% of your balance each month to the full outstanding amount. You can tailor your repayments to suit your current financial situation[@financing-arrears-warning]
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Rewards and offersSome credit cards offer rewards for purchases, so you can earn cashback or loyalty points to redeem at several merchant locations. They may also come with offers, such as free lounge access and discounts, which can be redeemed at no extra cost
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Lower limitsCredit cards can have lower borrowing limits compared to loans, so if you want to borrow a small amount over a short amount of time, it could be worth considering a credit card
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Flexible borrowingYou’ll be given a credit limit if approved for a credit card – you can borrow as much or as little as you want up to that amount
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Introductory offersSome credit cards come with an introductory offer, such as interest free purchases for a fixed period. But if you don’t repay the balance in this timeframe, you’ll be charged interest
Benefits of a personal loan
Personal loans can offer:
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A structured repayment planYou’ll be given a set amount to repay in instalments each month over the course of the loan, which can make it easier to plan your finances
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High borrowing amountsYou may be able to borrow more through a personal loan than on a credit card
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A set amountYou can decide on a specific amount to suit your needs. You may also be able to get a top-up loan if you need to borrow more
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Set interest ratesWith a fixed-rate personal loan, the interest rate will be set at one rate for the duration of the loan
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Lower interest rates
Learn more: Quick guide to personal loans
Can you transfer a personal loan to a credit card?
Depending on the lender and the type of credit card you have, you may be able to transfer the balance of your loan across. This should be outlined in the loan agreement, but if you’re unsure, contact your loan provider and check if there are any fees or charges for transferring your balance.[@financing-early-repayment-warning]
If you’re moving the balance to a 0% credit card, make sure you’ll be able to repay the amount during the 0% interest-free period to avoid being charged interest later.
Can you use a personal loan to pay off a credit card?
As you’ll need to make monthly repayments, a personal loan can give a more structured repayment plan. You’ll need to pay interest, but a fixed-rate personal loan means you’ll be paying one interest rate for the full loan term.
Make sure you’re able to meet the repayments on a personal loan.
If you're not sure if a personal loan is right for you, you may want to look at an instalment plan, which you can repay over a fixed term.
Things to consider
Before you borrow anything, it’s important to consider what you can afford, taking into account any fees and charges, and the interest.[@financing-refinancing-warning]
There may be other borrowing options that are better suited to your needs, such as a mortgage if you’re purchasing a home or an education loan if you’re paying school fees.
It’s important to weigh up all your options before applying to borrow money. Applying for lots of credit can have a negative effect on your credit score.
Find out more about a Personal Loan
Put your plans into action with an HSBC Personal Loan.
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