Compare the true total cost of borrowing via a personal loan versus a credit card. See monthly payments, total interest, and which option is cheapest for your situation.
| Option | Monthly Payment | Total Interest | Total Repayable |
|---|
| Factor | Personal Loan | Credit Card |
|---|---|---|
| Typical APR (UK, 2026) | 6–12% (good credit, £5k+) | 21.9% standard; 0% deals available |
| Fixed monthly payment? | Yes — predictable | No — minimum only required |
| Can repay early? | Yes (ERC may apply) | Yes (anytime, no fee) |
| Revolving credit? | No — lump sum | Yes — spend again after repaying |
| Section 75 protection? | No | Yes — for purchases £100–£30,000 |
| Best for | Planned, fixed-term borrowing | 0% deals; consumer protection; flexibility |
For most borrowing amounts and terms, yes. Personal loans in the UK typically charge 6–12% APR for sums above £7,500, versus 20–30% APR for standard credit cards. Borrowing £5,000 over 36 months at 8% APR costs £640 in interest; the same amount on a 21.9% APR credit card with equal payments costs approximately £1,758 — nearly three times more.
A credit card is better when: (1) you can get a 0% purchase or 0% balance transfer deal — then you pay no interest, (2) you're borrowing a small amount (under £1,000) for a very short time, (3) you need flexibility to repay early without charges, (4) you want Section 75 consumer protection on purchases.
A good personal loan APR depends on the amount: under £3,000: 15–25% APR; £3,000–£7,500: 8–15% APR; £7,500–£15,000: 5–8% APR; over £15,000: 4–7% APR. The representative APR is for those who meet criteria — many applicants receive a higher personal rate. Always compare using total amount repayable, not just monthly payment.
Yes, you can settle most personal loans early. Lenders may charge an early repayment charge (ERC), typically 1–2 months' interest on the outstanding balance. Under FCA rules, you must be told the settlement figure within 7 days of requesting it. For small loans, early settlement can save significant interest even after the ERC.
Applying for a personal loan involves a hard credit search, temporarily reducing your score. However, taking out a loan and making all payments on time actually improves your credit score over time — it demonstrates responsible borrowing behaviour. Making all payments on time is the single most important factor in building a good credit score in the UK.
Most UK personal loan lenders have a minimum of £1,000, though some specialist lenders offer loans from £250. For amounts under £1,000, a credit union loan, credit card, or 0% purchase card may be more appropriate. Above £1,000, mainstream lenders from Nationwide, Barclays, Halifax, Tesco Bank, and AA offer competitive rates.
A representative APR is the rate that at least 51% of accepted applicants receive. The rate you are personally offered may be higher if your credit history is less strong. Always check the personalised rate before accepting — use eligibility checkers with soft searches to see your likely rate without affecting your credit score.
Yes — if you clear your credit card balance in full each month, you pay zero interest, making it essentially free credit for up to 56 days. This only works if you have the funds to clear the balance. If there is any chance you cannot clear the full balance, a personal loan at 8–12% APR is almost always cheaper than carrying a credit card balance at 21.9%.
UK credit card minimum payments are typically 1–3% of the outstanding balance or £25, whichever is greater. Paying only the minimum is extremely expensive — a £5,000 balance at 21.9% APR with minimum payments only takes approximately 28 years to clear and costs over £7,000 in interest. Always pay more than the minimum.
Often yes — if you're paying 21.9% APR on a credit card and can get a personal loan at 8% APR, the saving over 3 years on a £5,000 balance is approximately £1,118 in interest. However, consolidation only works if you change spending habits — otherwise you end up with the loan repayments plus new credit card debt.
A 0% purchase credit card charges no interest on new spending for a promotional period, typically 12–24 months. This makes large purchases interest-free — equivalent to an 0% APR loan. After the 0% period ends, the standard rate (typically 21–27% APR) applies to any remaining balance. Ideal for planned large purchases where you can clear the balance within the promotional window.
Online personal loan applications in the UK typically receive an instant decision. Funds are often transferred within the same day or the next working day. Some lenders (especially building societies) may take 3–5 working days. If affordability checks require additional documentation, the process can take longer.