Mozo guides

Personal loans vs credit cards

woman shrugging because not sure about personal loan v credit card

When you’re looking for a means of credit to fund an upcoming expense like a holiday, revamping your home or paying for your big day, two main banking products are likely to come to mind - a personal loan or a credit card.

Choosing between the two can be tricky because they both have their pros and cons and both suit different types of borrowers.

Personal loans

Let’s start by running through the first option of taking out a personal loan and the associated drawcards:

Set borrowing amount

When you take out a personal loan you will be approved for a set amount, which means you won't be tempted to spend more like with a credit card.

  • Example: Jenny is looking to renovate her kitchen and has been quoted a fixed price by a contractor. As she knows how much the kitchen reno will cost and only needs the money for this purpose, she decides that a personal loan is her best option.
  • Mozo tip: To ensure you’re always paying off your personal loan in full each month, set up a direct deposit to match your pay day from your bank account to the lender.

Interest free cash withdrawals

Unlike credit cards that come with the slap of a high cash advance rate if you withdraw money from an ATM, with a personal loan withdrawing cash is far cheaper, as you won’t be penalised for making this transaction.

  • Example: Engaged couple David and Maggie need to pay some of the suppliers for their upcoming wedding in cash. As they know they’ll be charged a steep cash advance rate with the credit card option, David and Maggie decide taking out a low rate loan is their best bet. They look for a personal loan that allows them to make extra repayments and pay it off early, so once they receive their wishing well money from guests they can pump it into the loan.

Repayments remain consistent

If you decide to opt for a fixed rate loan, you’ll easily be able to budget for your repayments as they’ll remain the same over the life of the loan. By comparison, credit card interest rates are variable, which means they can change with the market.

  • Example: George is planning his first big overseas vacay and is on a tight budget. A personal loan means he’ll be able to budget for his repayments each month and can travel with the peace of mind they won’t change.
  • Mozo tip: Just be mindful, if you’re thinking of making extra repayments on a fixed rate loan some come with the bite of a break cost fee, which can often be quite high.

Compare personal loans here:

Personal Loan Comparison Table - last updated 9 December 2023

Search promoted personal loans below or do a full Mozo database search . Advertiser disclosure
  • Mozo Expert Choice Badge
    Unsecured Personal Loan


    interest rate
    comparison rate
    Monthly repayment
    6.75% 26.95% p.a.
    6.75% 26.95% p.a.based on $30,000
    over 5 years

    Borrow up to $50,000 unsecured. Perfect if you earn more than $22,100 p.a. and have good to excellent credit. Multi-year winner of Mozo’s Experts Choice Unsecured Personal Loan Award, 2021, 2022, 2023 & 2024^'

    Repayment terms from 2 years to 7 years. Representative example: a 5 year $30,000 loan at 6.75% would cost $35,430.23 including fees.

  • Unsecured Personal Loan


    interest rate
    comparison rate
    Monthly repayment
    5.76% 24.03% p.a.
    6.55% 24.98% p.a.based on $30,000
    over 5 years

    Fast, easy and 100% online, this is a low cost loan with no ongoing fees or extra repayment penalties. It's perfect for savvy borrowers with great credit. If you’re over 18 and earn above $30,000, you could qualify (other eligibility criteria may apply).

    Repayment terms from 3 years to 7 years. Representative example: a 5 year $30,000 loan at 5.76% would cost $35,173.52 including fees.

  • Personal Loan

    Unsecured, Fixed, Exceptional Credit

    interest rate
    comparison rate
    Monthly repayment
    6.57% p.a.
    6.57% p.a.based on $10,000
    over 3 years

    Borrow from $5,000 to $50,000 with a Plenti Unsecured Personal Loan. Flexible loan terms of 1 - 7 years. $0 Monthly, $0 Early Repayment Fees and $0 Exit Fees. Get a rate estimate without impacting your credit score. Once approved, you could receive your funds in as little as 24hrs.

    Repayment terms from 3 years to 7 years. Representative example: a 3 year $10,000 loan at 6.57% would cost $11,340.11 including fees.

  • Debt Consolidation Loan

    interest rate
    comparison rate
    Monthly repayment
    6.57% 8.48% p.a.
    7.19% 8.84% p.a.based on $30,000
    over 5 years

    Competitive fixed rates on loans up to $75,000 depending on your credit score. Zero monthly account keeping fees, no exit fees and no early repayment fees. Make weekly, fortnightly or monthly repayments, over 1 to 7 years managed entirely online, at any time. Fast and easy, 100% online application.

    Repayment terms from 1 year to 7 years. Representative example: a 5 year $30,000 loan at 6.57% would cost $35,528.12 including fees.


Credit cards

Now that you've had a quick rundown on the benefits of a personal loan, let’s turn our focus to the plastic option. Here are some of the pros of a credit card:

Honeymoon periods

One of the biggest reasons to apply for a credit card is to take advantage of an interest free offer, which means for a set introductory period you will pay no interest at all, as long as you make the minimum monthly repayment.

  • Example: Kelly has some car maintenance coming up and needs to pay for everything from the rego through to the green slip. While she doesn’t have the money upfront, she knows that she can pay it back over a period of 12 months. So she applies for a credit card with a 0% intro rate offer for the first year and works out how much she needs to pay each month to pay it off before the card reverts to a higher rate.


Credit cards provide great flexibility as they act as a line of credit that you can draw on when you please. Whereas, personal loans are very structured, as they only allow you to borrow a set amount and pay it back over an agreed period.

  • Example: Amelia is planning on giving her home a refresh and wants to undertake the small reno herself. As she will be tackling the jobs on the weekend, she estimates that the refreshes will take a good 6 months to complete. Since she doesn’t have a set budget, she decides that a credit card is her best borrowing match, as she can pay as she goes.
  • Mozo tip: While you don’t need to pay the balance in full each month with a 0% interest free offer, make sure you pay at least the minimum repayment amount and before the intro rate period comes to an end, pay off the balance in full.


If you love something for nothing then a rewards credit card ould tempt you to choose plastic over a loan, as there are options that are linked to rewards programs offering generous point schemes or even cash back offers.

  • Example: John travels for work to meet clients on a regular basis and needs credit to pay for his upcoming trip. With a platinum credit card, he will rack up points that he can put towards reducing the cost of his upcoming flights.


Many premium and reward credit cards offer a variety of shopping and travel insurances to their cardholders. You can shop ‘til you drop, confident that your purchases are covered by the extended warranties and price protection offered by some providers. Some premium and reward credit cards also offer free travel insurance options, such as interstate flight insurance and transit accident insurance cover.

  • Example: Kyle flew from Melbourne to Brisbane to visit his mum. Unfortunately, his flight was cancelled and rescheduled. Then, once he arrived in Brisbane, he learned that the airline lost his luggage. Luckily, as he booked his travel on his credit card, he could file an interstate flight insurance claim and was reimbursed for his losses.

Personal loans vs credit cards

Personal loan Credit card
Interest rates Interest rates vary across providers, but the average for an unsecured personal loan is 9.53%**. While interest rates for credit cards are generally higher - 17.02%** on average - they can be avoided by paying your balance in full each month.
Repayments Can be weekly, fortnightly or monthly, with many providers allowing for extra repayments to be made. While your bill comes monthly, repayments can be made at any time. Interest applies if your balance isn’t paid in full by the payment due date.
Late fees Late fees vary across providers, but the average for an unsecured personal loan is $16**. The average is $18**. Credit card late fees are often either a flat dollar amount, or a percentage of your balance.
Eligibility criteria You must be over 18 years old, an Australian citizen or permanent resident, meet the minimum income requirements, and have a good credit score, as well as any requirements specific to the provider. You must be over 18 years old, an Australian citizen or permanent resident, earning enough to pay the max credit limit on the card, and have a good credit score, as well as any requirements specific to the provider.
Affects your credit score Yes. If you fail to pay your loan on time, your credit score will take a hit. Yes. A credit card is a direct line of credit, so if you fail to make a repayment, your credit score will suffer.
What it's good for Larger purchases you can’t pay off in a month Smaller, ongoing purchases.

The data above is correct as of 18 January, 2022

** Based on the Mozo database

Of course, Aussies don’t just use credit cards and personal loans for making purchases, as they are also a means of ditching debt for good. When choosing between the two, you’ll need to decide whether a debt consolidation loan or balance transfer card will be your weapon of choice.

Debt consolidation loan vs balance transfer credit card

Debt consolidation loans


  • Allows you to merge varying debt from credit card through to car loan balances over to a single personal loan
  • Set repayments of a fixed interest rate makes it easy to budget, as you’ll know what your ongoing monthly repayments will be each month


  • You could be charged a break cost fee if you try to pay out a fixed rate consolidation loan early
  • Debt consolidation interest rates are often higher than balance transfer intro rates

0% balance transfer cards


  • If you work out how much you need to repay each month during the balance transfer period, you could clear yourself of debt without paying any interest
  • May pay off debt faster, as you’re not paying interest like with a debt consolidation loan


  • You can’t move personal loan debt over to a balance transfer card
  • If you don’t pay off the debt within the BT period the card is likely to revert to a much higher rate, which sometimes is the cash advance rate that could tip over the 20% mark
  • May be tempted to spend on the balance transfer card, pushing you deeper into debt

The final word

The number one rule when it comes to choosing between personal loans vs credit cards is thinking about the way you will use the product. For instance, if you know exactly how much you want to borrow and want repayment consistency, then a personal loan could be your borrowing match. Alternatively if you prefer to pay as you go and know you won’t be tempted to spend more than you need to, then a credit card could be for you.

The same applies for ditching debt, as a personal loan may be a good option if you’re on a strict budget, whilst a balance transfer could save you big bucks in interest if you know you can diligently pay the debt back within the interest free period.

Whichever option you choose make sure you conduct due diligence by comparing either the personal loan or credit card markets to find the best deal for you.

Mozo Editorial
Mozo Editorial

Mozo’s team of experienced journalists and money experts provide news, insights, practical guides and expert analysis to help you master your personal finances. We follow editorial guidelines that focus on accuracy, reliability and timeliness; helping you make informed financial decisions with confidence and the most of your hard-earned money.

* WARNING: The Comparison Rate combines the lender's interest rate, fees and charges into a single rate to show the true cost of a personal loan. The comparison rates displayed are calculated based on a loan of $30,000 for a term of 5 years or a loan of $10,000 for a term of 3 years as indicated, based on monthly principal and interest repayments, on a secured basis for secured loans and an unsecured basis for unsecured loans. This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

^See information about the Mozo Experts Choice Personal Loan Awards

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