Personal Loan vs Credit Card: Which Is Cheaper in the UK?

Need to borrow? The choice between a personal loan and a credit card depends on how much you need, how long you need it for, and your discipline with repayments.

When a Personal Loan Wins

For amounts over £5,000 and terms over 6 months, a personal loan is almost always cheaper than carrying a credit card balance. The fixed term forces you to actually pay the debt off, and the interest rate is lower. A £10,000 loan at 8.9% over 3 years costs £1,272 in interest. The same £10,000 on a credit card at 22.9%, paying £316/month (the equivalent), takes over 4 years to clear and costs £5,200+ in interest.

When a Credit Card Wins

For small amounts (under £3,000) that you can repay within the interest-free period (usually 25-55 days), a credit card is effectively a free short-term loan. No personal loan can match that — the initiation alone makes small loans uneconomical. A 0% purchase card (offering 12-24 months interest-free) is even better for planned purchases you'll pay off within the promotional period.

The Verdict

Use a credit card for: short-term borrowing you can repay within the grace period (free), small amounts under £3,000, and flexibility. Use a personal loan for: anything above £5,000, any borrowing you can't repay within 3 months, and when you want a fixed end date. Always compare the total cost, not just the monthly payment. Use our Personal Loan Calculator and Loan Comparison to see the numbers.