Personal Loan vs Credit Card: Which Costs Less?

Compare personal loans vs credit cards with federal guidance. Interest rates, fees, and debt consolidation strategies.

The Consumer Financial Protection Bureau provides guidance on choosing between personal loans and credit cards for financing needs. **Interest Rate Comparison** Personal loans typically offer: - Fixed interest rates (6-36% APR) - Predictable monthly payments - Set repayment timeline (2-7 years) Credit cards typically feature: - Variable interest rates (15-29% APR) - Minimum payment flexibility - Revolving credit availability **When Personal Loans Make Sense** - Debt consolidation at lower rates - Large purchases with fixed payments - Home improvements or major expenses - Credit card debt payoff **When Credit Cards Are Better** - Small, short-term purchases - Building credit history - Reward earning opportunities - Emergency fund backup **CFPB Debt Consolidation Tips** Calculate total costs including: - Interest charges over loan term - Origination fees and closing costs - Impact on credit utilization - Payment flexibility needs Use the CFPB's debt worksheet to compare total costs and make informed decisions. **Choosing the Right Option** Consider these factors when comparing: - Total interest cost over full term - Monthly payment affordability - Impact on credit utilization ratio - Flexibility for extra payments - Penalty fees and conditions **Next Steps** 1. Calculate total costs for both options 2. Review your budget capacity 3. Consider your financial goals 4. Apply for the most suitable option For additional guidance, explore our <a href="/budget-planner">budget planning tools</a> and <a href="/financial-calculators">debt payoff calculators</a>.