If you want to borrow money, applying for a credit card or personal loan are two options that might be available to you.
There are many factors to think about before considering either option, such as the amount you’re looking to borrow, or the time you’ll need to pay it back.
Also, credit cards and loans both work very differently; so one may be better than the other in certain scenarios.
It’s important to understand the costs involved with any kind of borrowing. As well as the original balance, you’ll also have to pay back any interest or fees.
Before borrowing, you should also consider:
A credit card is a physical card that allows you to borrow money to pay for goods and services and to pay it back at a later date (usually with interest added). They’re often used for smaller purchases.
Find out more about how credit cards work.
Scenario: You’d like extra money to help pay for your weekly food shops, and know you’ll be able to pay this back once you get paid your monthly wage.
In this scenario, a credit card might be a better option than a loan. If you pay off your total balance in full each month, you won’t have to pay any interest. You can also use a credit card on the go, which would be useful for regular purchases (like food shops).
A personal loan is a type of loan that allows you to borrow a fixed amount of money. You then pay it back in instalments over an agreed period of time.
Scenario: You’d like to borrow £7,000 to pay for a new bathroom. You’d ideally like to pay this off over a longer, set amount of time, with regular and structured repayments.
As they’re designed to be paid off over a longer period of time, and because they allow predictable monthly repayments, applying for a personal loan might be a better option than applying for a credit card in this instance.
If you find yourself in financial difficulty after taking out a personal loan or credit card, contact your provider as soon as possible. They may be able to support you with an alternative repayment plan.
You can also get free help and advice from independent organisations such as Citizens Advice, StepChange and Turn2Us.
Not found what you're looking for?
Contact our support team