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If you need cash to buy a car, cover the cost of unexpected bills, or pay for an upcoming holiday, you might be considering a personal loan or a credit card. While they both offer a simple way to apply for credit, choosing the best one for you can be tricky. After all, what might be right for some, might not be right for you. 

To help you decide, let’s run through what the difference is between the two, the pros and cons of each, and how to decide which one is right for you. 

What’s the difference between a credit card and personal loan?

A credit card and personal loan are both types of credit and that’s usually where the similarities end. 

Personal loans

A personal loan is where you borrow a lump sum of money from a financial institution and repay it with interest over a set period of time, often between one and seven years. A personal loan can be used for many purposes and lenders offer a variety of options to suit your financial needs. 

Often, there are two types of personal loans secured personal loans and unsecured personal loans. A secured personal loan is where an asset is required to ‘secure’ the loan. An asset can be anything including a car, house, boat, or even jewellery. On the other hand, an unsecured personal loan does not require you to provide an asset to secure the loan. 

Generally, a personal loan is more suitable for someone looking to make a large purchase. Say, for example, home renovations, medical costs, or debt consolidation.      

Credit cards

A credit card is a line of credit that allows a borrower ongoing access to a certain amount of funds. With a credit card, a borrower is offered a credit limit and can spend up to that limit as long as the account remains in ‘good standing’. For a credit card account to be in ‘good standing’, it requires paying the minimum repayment each month otherwise you will accrue interest on the outstanding balance. 

Generally, credit cards offer interest-free periods, balance transfers, and rewards programs. Often, a credit card is a more suitable option for someone who is wanting funds for smaller purchases at around $5,000 or less. 

What are the pros and cons of personal loans?

If you’re weighing up whether to get a personal loan, here’s a rundown of the pros and cons: 


✓ Receive funds in one lump sum

✓ Less temptation to overspend as you’ll be approved for a set amount

✓ Suitable for larger purchases e.g. a car or home renovations

✓ Suitable for debt consolidation

✓ A repayment schedule means the debt will be paid off by an end date


✖ No interest-free periods

✖ Often comes with associated fees e.g. set-up, service, or early repayment fees

✖ Carry debt over a longer time period

✖ If a secured personal loan, you’ll have to provide an asset as collateral 

What are the pros and cons of credit cards?

Whether or not a credit card is the right option for you depends on a few factors. Below, we list the pros and cons of getting a credit card: 


✓ Great for constant cash flow

✓ Comes with rewards programs

✓ Offers interest-free periods

✓ Can spend the funds immediately

✓ Suitable for smaller purchases or everyday spending


✖ Higher-interest rates

✖ Often comes with an annual fee

✖ Risk overspending due to easy access to funds

✖ Minimum repayment every month means your debt can stick around for longer

Personal loans vs credit cards: Which one is better for me?

When deciding between a personal loan or credit card, there are a few questions you can ask yourself to help make your decision easier. Here are four key ones: 

What do you need the money for? If you’re looking to make a big one-off purchase, such as a house or car, then a personal loan might be a more suitable option. However, if you want ongoing access to credit, then a credit card might be more suitable.
How much do you need to borrow? Generally, credit cards offer a smaller amount to borrow than personal loans often no more than $5,000. If you’re looking to borrow a large amount of money, a personal loan might be a more suitable option.  
What kind of repayment schedule do you want? A personal loan comes with a structured repayment schedule and has an end date. On the other hand, a credit card allows ongoing access to money. If you need more discipline with repayments, then a personal loan might be your best bet. 
What is your financial situation like? If you are good with following a budget and avoiding overspending, a credit card is worth having a look at. If you feel you’re unable to pay off debt quickly or find it hard to control your spending, a personal loan might be more suitable for your situation.

Ultimately, we’re not financial advisors. So, if you’re ever unsure about which option may be right for you, consider seeking professional advice

Looking for a personal loan? 

If you’re looking for a personal loan, then you’re in luck! At Jacaranda Finance, we offer personal loans from $1,000 up to $15,000 online within minutes. Whether you’re after an unsecured or secured loan, we offer a range of personal loans to suit a variety of needs. If you apply with us, you could receive an outcome on your application in just an hour. Even better, if you are approved for a loan, you could receive your cash within 60 seconds. Apply today! 

Written by: Jacaranda Team