Personal Loan vs. Credit Card: Which Is the Right Choice For Your Financial Needs?

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You might find yourself at a crossroads when you urgently need funds for a significant expense, whether it’s this month’s rent or a medical emergency. Personal loans and credit cards are two of your most viable options, each with pros and cons influencing your repayment method and cost. 

This article explores the personal loan vs. credit card debate to help you understand their fundamental differences and what they’re best for.

Personal Loan vs. Credit Card: Which is Better for You?

Personal loans and credit cards provide access to extra funds you can use. Here’s a rundown of their benefits, drawbacks, and best use cases. 

Personal Loan1. Favorable interest rates
2. Higher loan amounts
3. Receive a lump sum upfront
1. High interest rates in some instances
2. Additional fees
3. Lengthy approval process
Credit Cards1. Highly convenient
2. Offers rewards
3. Builds your credit score
1. Risk of overspending
2. Exposure to fraud and identity theft
3. High interest rates

Personal Loans

How it works

A personal loan is a lump sum of money you borrow for many reasons, from restructuring debt to making a down payment for a house. Repayment involves monthly installments plus interest through amortization.  

A common personal loan myth is that you can only apply for one from a bank. The reality is that plenty of lending financial institutions can provide you with a personal loan. They often have diverse loan products for specific purposes, such as a truck loan if you want to invest in a fleet.

You only need to know loan terms and definitions to help you better understand how one can benefit you.


  1. Favorable interest rates: Credit card interest rates typically play around 2%, which is higher than personal loans at 1.2% up to 1.94%. 
  2. Higher loan amounts: Personal loans can reach ₱2,000,000, which is helpful if you intend to consolidate your debt.
  3. Receive a lump sum upfront: Receiving a large amount of money in one go allows you to pay for significant expenses immediately and comes with a straightforward repayment plan. It can quickly help you cross off the financial portion of your car-buying checklist or other similar expenses.


  1. High interest rates in some instances: Interest rates can be substantial, especially when you have a poor credit history. It’s also why some loans, specifically secured loans, require collateral to help lenders ensure they get their money back.
  2. Additional fees: Personal loans tend to have costs that aren’t obvious when you apply for them, such as loan origination and early payment fees.
  3. Lengthy approval process: Typical loan applications may take time, depending on the company offering them. Asialink Finance Corporation has a one-day approval process when you apply for a new loan to help you get the money you need in your hands faster.

Credit Card

How it works

A credit card allows you to access a line of credit for several purposes. Whenever you pay for something, you’re borrowing that amount from the card issuer, which you must repay with additional interest. 


  1. Highly convenient: Most stores readily accept credit cards, allowing you to use them wherever you are, even abroad.
  2. Offers rewards: Credit card companies reward you with points for certain amounts you spend. These points allow you to redeem vouchers, discounts, and products from partner brands.

    Some credit card companies also provide introductory promotions to make your first year even more attractive and enjoyable, such as a 0% annual percentage rate (APR) or no annual fee for life if you reach a certain amount within a specified period from receiving your card.
  3. Builds your credit score: Repaying your credit bill on time keeps you in good standing with the financial institution. Lenders are more likely to increase your credit limit when your credit score improves, resulting in more money you can use.


  1. Risk of overspending: Because of how frictionless it is to use your credit card, it’s easy to blow past your budget without noticing.  
  2. Exposure to fraud and identity theft: Fraudsters who illegally obtain your credit card information can use it without your consent. This underscores the importance of vigilance when using your credit card, especially for online transactions.
  3. High interest rates: Credit cards can have considerable interest rates, which are much higher than other forms of borrowing.

When Should You Use Credit Cards and Personal Loans?

Although both options provide additional funds, the purpose can often determine which financial product is best for you.

Personal Loan vs. Credit Card: Use Cases
Personal LoanCredit Cards
Consolidating debt
Paying off large expenses
Starting a business
Building your credit score
Paying recurring expenses
Spending abroad

Credit cards

Some of the most common credit card uses involve the following:

  • Building your credit score: A high credit score helps you secure more favorable terms when you apply for other financial products, including loans and mortgages.
  • Paying recurring expenses: These include groceries, utilities, and subscriptions. Since plenty of credit cards come with rewards, using your card for recurring expenses helps you continuously earn more points you can redeem later on.
  • Spending abroad: Countless stores worldwide accept credit cards, allowing you to pay with one wherever you travel. 

Personal loans

Several personal loan uses tend to be less regular than credit card uses. That’s because personal loans are better for large, one-time payments and carefully managing your finances whether you’re:

  • Consolidating debt: Personal loans tend to have more manageable interest rates, so you can use them to pay off outstanding credit card bills with high interest. 
  • Paying off large and specific expenses: Loan products often vary, and there are loans for specific purposes. For instance, if you need funding for a new car, it would make more sense to apply for a car loan vs. a personal loan. There are also education loans and home loans you can explore, depending on what you need the money for. 
  • Starting a business: If you intend to start a business but don’t have the money, a personal loan can give you the funding to invest in equipment and hire people. 

Both credit cards and personal loans are excellent and convenient options for various financial needs. It’s best to use them when needed and you’re certain you can pay them off promptly.

Acquire the Appropriate Financial Support You Need 

Personal loans and credit cards are popular financial instruments you can rely on when you need extra money for certain expenses. However, the appropriate product will depend on what you intend to spend on. You can explore financial blogs to find other helpful resources when deciding which tool is best for you.

If you’re interested in applying for a personal loan, consider borrowing from a trusted brand such as Asialink. We can provide an online loan with low interest to fund your next venture, buy your first car, or cover medical expenses. 

Apply for a loan from Asialink today, and be one step closer to achieving your financial goals.

Gab Doromal