Compare · Credit card vs Personal loan
Credit card vs personal loan — which is cheaper for borrowing in the UK?
In short. A 0% purchase or balance-transfer credit card can be the cheapest way to borrow if you'll clear the balance before the 0% period ends. A personal loan is usually cheaper for larger amounts repaid over 2–7 years at a fixed rate.
Section 75 of the Consumer Credit Act 1974 makes a credit card uniquely useful for purchases between £100 and £30,000 — the card company is jointly liable if the seller fails to deliver. Personal loans don't have that protection.
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Side by side
| Criterion | Credit card | Personal loan |
|---|---|---|
| Interest rate | 0% intro then ~20–30% APR | Fixed for the term (often 7–15% APR) |
| Repayment | Flexible minimum payment | Fixed monthly repayment |
| Typical amount | Up to your credit limit | £1,000 – £25,000 |
| Typical term | Revolving — no end date | 1–7 years |
| Section 75 protection | Yes — £100 to £30,000 purchases | No |
| Effect on credit score | High utilisation can hurt score | Generally neutral if repaid on time |
| Settlement before term | Anytime, no penalty | May incur up to 58 days' interest |
When Credit card usually wins
- You can clear the balance before the 0% deal ends
- You need Section 75 purchase protection
- The amount is small and you want flexibility
When Personal loan usually wins
- You need a fixed amount with a fixed end date
- You want certainty over monthly payments
- The amount is too large for a 0% card
- You won't realistically clear a card balance in the 0% window
FAQ
- Does applying for a credit card hurt my credit score?
- A full application leaves a hard search on your file. Multiple hard searches in a short period can lower your score. Most lenders offer a soft-search 'eligibility check' that doesn't affect your score and gives a personalised acceptance odds.
- What is APR and is the rate I get the same?
- APR is the Annual Percentage Rate including interest and standard fees. Lenders must offer the advertised representative APR to at least 51% of accepted customers — you could be offered a higher rate.
- Can I pay off a personal loan early?
- Yes. Under the Consumer Credit Act you can settle early at any time. The lender can charge up to 58 days' interest in compensation for loans over £8,000 (28 days for smaller loans). Ask for a settlement figure first.