Mozo guides

Personal loans vs credit cards

woman shrugging because not sure about personal loan v credit card

When looking for a credit option to fund a big upcoming expense like a holiday, home renovation or wedding, two banking products are likely to come to mind – a personal loan or a credit card.

Choosing between a personal loan and a credit card can be tricky because they both have their pros and cons and suit different types of borrowers. Here’s a breakdown of the two options:

Personal loans

Here are some things to consider when taking out a personal loan:

Set borrowing amount:

When you take out a personal loan, you’ll be approved for a set amount, which means you can’t spend more than that amount should temptation kick in, 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 exactly how much the kitchen reno will cost and only needs the money for this purpose, she decides that a personal loan is the best option for her.

Mozo tip: To ensure you always make your loan repayments, set up a regular direct debit from your bank account to the lender to line up with your usual payday. That way, your repayments are already taken care of before you can touch your pay.

Interest-free cash withdrawals:

Unlike credit cards, which come with high cash advance rates if you withdraw money from an ATM – withdrawing cash from a personal loan is typically far cheaper, so 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. They know they’ll be charged a steep cash advance rate for withdrawing cash from a credit card, so they decide to take out a low-rate personal loan instead. David and Maggie look for a personal loan that allows extra repayments and can be paid off early, so once they receive their wishing-well money from guests, they can put it straight into the loan.

Consistent repayments:

One of the perks of having a fixed-rate personal loan is that it’s easier to budget for your regular repayments, as the amount will stay the same for the life of the loan. On the other hand, credit cards have variable interest rates, which can change with the market.

  • Example: George is planning his first big overseas vacay and is on a tight budget. Going for a fixed-rate 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, as some come with the bite of a break cost fee, which can often be quite high.

Start comparing personal loans below:

Compare Personal Loans - last updated 16 April 2024

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.

  • Express Personal Loan


    interest rate
    comparison rate
    Monthly repayment
    14.95% 27.95% p.a.
    29.30% 42.8% p.a.based on $10,000
    over 3 years

    Access fast finance on loans from $5,000 to $25,000 with a Jacaranda Finance Personal Loan. Terms from 24-48 months. Check if you qualify with no impact on your credit score. Enjoy a speedy, online approval.

    Repayment terms from 2 years to 4 years. Representative example: a 3 year $10,000 loan at 14.95% would cost $14,324.71 including fees.

  • Debt Consolidation Loan

    interest rate
    comparison rate
    Monthly repayment
    6.57% 18.99% p.a.
    7.19% 19.39% 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 some of the benefits of a personal loan let’s check out the plastic alternative. Here are some of the pros of a credit card:

Honeymoon periods & interest-free offers:

One thing to look for when taking out a credit card is one that has a good interest-free offer. Having a credit card that comes with an introductory interest-free offer means that for a set period, you won’t pay any interest 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 are one of the more flexible finance options as they act as a line of credit that you can draw on as you need. Personal loans, however, are very structured and only let you borrow a set amount and pay it back over an agreed period.

  • Example: Amelia is planning on giving her home a refresh by taking on a small reno herself. As she’ll be tackling the jobs on the weekend, she estimates that the reno should take roughly six months. 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 your credit card balance in full each month with a 0% interest-free offer, make sure you at least pay the minimum repayment amount, and before the intro rate period ends, pay off the balance in full.


If you’re after a little more bang for your buck, then a rewards credit card might tempt you to choose a credit card over a loan. There are loads of credit cards out there that are linked to rewards programs offering generous point schemes or even cash-back offers.

  • Example: John regularly travels for work to meet clients and needs credit to pay for his upcoming trip. With a platinum credit card, he’ll rack up points that he can use to reduce the cost of his upcoming flights.


Many premium and rewards credit cards come with various shopping perks, such as extended warranties and purchase protection. Some credit card providers even offer free travel insurance options, such as interstate flight insurance and transit accident insurance coverage.

Example: Kyle flew from Melbourne to Brisbane to visit his mum. Unfortunately, his flight was cancelled and rescheduled. Then, upon arrival in Brisbane, he learned that the airline lost his luggage. Luckily, since 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 10.83%**.
While interest rates for credit cards are generally higher (16.48%** on average), interest payments can be avoided by paying your balance in full each month.
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 $20**.
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, have a good credit score, and meet 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, have a good credit score and meet any requirements specific to the provider.
Does it impact 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 your credit score will suffer if you miss a repayment.
What it's good for
Larger purchases that you can’t pay off in a month
Smaller, ongoing purchases.

The data above is correct as of 22 January 2024

** Based on the Mozo database

Debt consolidation loan vs balance transfer credit card

Of course, Aussies don’t just use credit cards and personal loans for making purchases – they’re also commonly used to ditch debt. If this is you, you’ll need to decide whether a debt consolidation loan or a balance transfer card will be your weapon of choice.

Debt consolidation loans:

Here are some of the pros and cons of debt consolidation loans:

Lets you merge varying debt from credit card through to car loan balances over to a single personal loan
You could be charged a break cost fee if you try to pay out a fixed-rate consolidation loan early
Set repayments at a fixed interest rate makes the loan easier to budget for, as you’ll know what your regular repayments will be each month.
Debt consolidation interest rates are often higher than balance transfer intro rates

0% balance transfer cards

Check out a few of the pros and cons of debt consolidation loans:

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
You can’t move personal loan debt over to a balance transfer card
May pay off debt faster, as you’re not paying interest like with a debt consolidation loan
If you don’t pay off the debt within the balance transfer 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
You may be tempted to spend on the balance transfer card, pushing you deeper into debt

A final word

The number one thing to consider when choosing between a personal loan and a credit card is how 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 might be a better option.

The same applies to ditching debt, as a personal loan may be a good option if you’re on a strict budget – whereas a balance transfer might 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, use due diligence and compare personal loan or credit card products to help you find the right deal for you.

Rhianna Dews
Rhianna Dews
Senior Money Writer

Rhianna has a Master of Journalism and Communication from UNSW, and has contributed to several consumer publications including TechRadar, Simply Living Australia, Beauty News Australia, Beauty World News and Fashion Gone Rogue. With over eight years of experience helping consumers make the most of their money, and a background in creating content for brands including Foxtel and Vodafone, means she's always the first to know the latest consumer trends. Her focus is on millennial money motivation and helping Aussies make smart money moves in personal loans, credit cards and online shopping.

* 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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