Personal loans vs credit cards

Okay, so prior to becoming a financially responsible Mozonian, you had an unfortunate episode with your credit card. Or you're looking to make a necessary and major purchase that'll take a while to repay.

Loan or credit?

There's no definitive answer, but here are Mozo's top tips:

• Personal loan rates are typically lower than standard credit interest - by as much as 10% on a purchase rate. Rather than letting a debt sit there, clocking up interest, take out a personal loan to avoid overpaying the banks.
• Balance transfer cards offer lower rates than personal loan interest (confusing, we know). But most transfers expire after 6 to 12 months, at which point you'll likely find it much cheaper to move the debt to a low rate bank loan.
• Credit balance transfers look like deliciously low rate loans, and some are available for the life of the loan. But here's the catch: any purchases you make on the card will be charged at a high interest rate, and can't be paid off until the transfer is paid in full. So if you need to use the credit card for purchases, shift the debt from plastic to personal loan.
• Multiple credit cards are not a good way to manage debt. One consolidation loan could allow you to cancel most of your cards, which can help with budgeting and also your credit rating.
• Personal loans don't carry the temptation of "I'll have another round on plastic". If you're going on a long holiday, renovating your house, paying for further education, it's better to have a limit on your spending, rather than the open-ended debt-spiral of fantastic plastic.