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Personal Loan vs. 0% APR Credit Card

Personal loans may offer lower APRs than credit cards on average, but strategically used 0% APR cards can serve as a low-cost way to consolidate debt or finance a purchase.

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By Hilary Collins

Written by

Hilary Collins

Writer

Hilary Collins is a finance writer and editor. She loves taking topics that could be dry and complicated and turning them into engaging stories with actionable takeaways.

Edited by Jared Hughes

Written by

Jared Hughes

Editor

Jared Hughes is a personal loan editor for Credible and Fox Money, and has been producing digital content for more than six years.

Updated January 17, 2024

Editorial disclosure: Our goal is to give you the tools and confidence you need to improve your finances.

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Credible takeaways

  • 0% APR credit cards can be a low-cost or even no-cost way to finance a purchase or consolidate debt — but the 0% rate doesn’t last forever.
  • Personal loans might be a better choice if you can qualify for a competitive APR or need a longer period of time to repay the balance.
  • Payday alternative loans can be a lower-cost option for borrowers who have bad credit.

While personal loans have lower annual percentage rates (APRs) than credit cards on average, some credit cards have a 0% APR promotional period. If you’re financing a purchase, 0% APR credit cards can be a low-cost borrowing option — provided you can pay the balance off before the promotional period ends.

But if you can’t pay the balance off in time, the standard APR resumes, which can make repayment more difficult. Personal loans, on the other hand, have set repayment terms, meaning there’s a specific end date to pay off your debt.

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Differences between 0% credit cards and personal loans

Personal loans and 0% APR credit cards are both good options for financing large purchases or major expenses, but they differ in important ways. Here’s a quick look at some of the major differences.

Personal loan
0% APR credit card
Loan amounts
Can be up to $100,000 or more, depending on the lender, your credit profile, and income
Total credit line will vary based on financial profile and card issuer
Eligibility requirements
Credit score minimum (varies by lender), proof of income
FICO score generally 670 or above
Repayment terms
1 to 7 years or more
No set repayment term
Interest rates
Usually fixed, average of 12.17% as of August 2023
Typically variable, 0% for promotional period, average of 21.19% (as of August 2023) after
Time to fund
As soon as same or next business day
Can be approved and get digital access as soon as same day
Fees
Origination fee
Balance transfer fee, cash advance fee
What it's best for
Consolidating debt, major purchases, surprise expenses
Balance transfer, major purchases, and surprise expenses that can be paid off within promotional period

What is a personal loan and who can qualify?

Personal loans are flexible loans, usually for amounts between $600 and $100,000 or more, depending on the lender. Repayment terms typically last between one and seven years, but home improvement loans and RV loans may have longer repayment terms, such as 12 years. Personal loans can be used for almost any purpose, but common uses include consolidating debt at a lower APR and financing large or unexpected expenses. 

While personal loans on average tend to have lower interest rates than credit cards, according to the Federal Reserve, the rate you’re charged depends on your credit score and other financial factors, running the gamut from 6% to 36%. Personal loans also have fixed APRs, usually, which means the rate will never change while you’re paying off the loan. This is in contrast to variable rates, which fluctuate with market conditions.

Personal loans are typically unsecured loans, meaning collateral is not required to secure the loan, like a home or a car. However, some lenders offer secured personal loans that might have better rates if you have a low credit score. If you default, however, you will be at risk of losing your collateral.

Qualifying for a personal loan is usually a matter of having good-enough credit and a verifiable income stream. You can often prequalify for a personal loan, and it won’t impact your credit score. However, prequalification is not an offer of credit, but rather an estimation of what a lender can offer you. As a result, your final rate may be different. Also, once you proceed to a formal loan application, the lender will conduct a hard credit pull that could lower your score by a few points temporarily.

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Note

The APR represents the total cost of borrowing, including the interest rate and upfront fees. The lower your APR, the more interest you’ll save.

Pros and cons of personal loans

Here are the pros and cons to consider when taking out a personal loan.

Pros:

  • Flexible: Personal loans deposit a lump sum in your account, allowing you to use that money for a wide variety of purposes.
  • Set payment structure: Personal loans are usually installment loans with set APRs, meaning neither your APR nor your monthly payment will change over time.
  • No collateral needed: Most personal loans are unsecured, meaning that you don’t run the risk of losing a valuable item if you miss payments or default on the loan.
  • Fixed rates: Your rate won’t change while you’re paying off your loan, making your monthly payments predictable.

Cons:

  • Can cost more than a 0% APR credit card: If you can pay off your credit card balance before the 0% promotional APR runs out, you may be able to save on interest using a credit card instead of a personal loan to cover an expense or consolidate debt.
  • Origination fees: Some lenders charge an origination fee on personal loans — you’ll commonly see origination fees of between 1% and 12% of the total amount of the loan. That fee usually gets automatically deducted before the lender sends you the funds. For example, if you take out a personal loan for $1,000 and the lender charges an origination fee of 5%, $950 would be deposited in your account.
  • Need a good credit score to qualify for the best rates: While personal loans can offer very attractive rates for borrowers with good credit scores, borrowers with lower scores will likely experience a much higher cost of borrowing.
Advertiser Disclosure
4.24.2

Credible rating

Fixed (APR)

7.49% - 25.49%

Loan Amounts

$5000 to $100000

Min. Credit Score

700

on Credible’s website

View Details

3.93.9

Credible rating

Fixed (APR)

7.80% - 35.99%

Loan Amounts

$1000 to $50000

Min. Credit Score

620

on Credible’s website

View Details

4.44.4

Credible rating

Fixed (APR)

-

Loan Amounts

$2500 to $40000

Min. Credit Score

660

on Credible’s website

View Details

4.64.6

Credible rating

Fixed (APR)

8.49% - 17.99%

Loan Amounts

$600 to $50000

Min. Credit Score

760

on Credible’s website

View Details

4.54.5

Credible rating

Fixed (APR)

8.49% - 35.99%

Loan Amounts

$1000 to $50000

Min. Credit Score

600

on Credible’s website

View Details

4.94.9

Credible rating

Fixed (APR)

8.99% - 29.99%

Loan Amounts

$5000 to $100000

Min. Credit Score

Does not disclose

on Credible’s website

View Details

44

Credible rating

Fixed (APR)

8.99% - 35.99%

Loan Amounts

$2000 to $50000

Min. Credit Score

600

on Credible’s website

View Details

44

Credible rating

Fixed (APR)

9.57% - 35.99%

Loan Amounts

$1000 to $40000

Min. Credit Score

660

on Credible’s website

View Details

3.93.9

Credible rating

Fixed (APR)

9.95% - 35.99%

Loan Amounts

$2000 to $35000

Min. Credit Score

550

on Credible’s website

View Details

4.34.3

Credible rating

Fixed (APR)

11.69% - 35.99%

Loan Amounts

$1000 to $50000

Min. Credit Score

560

on Credible’s website

View Details

3.93.9

Credible rating

Fixed (APR)

11.72% - 17.99%

Loan Amounts

$3000 to $40000

Min. Credit Score

640

on Credible’s website

View Details

44

Credible rating

Fixed (APR)

-

Loan Amounts

$20000 to $200000

Min. Credit Score

660

on Credible’s website

View Details

3.73.7

Credible rating

Fixed (APR)

14.30% - 35.99%

Loan Amounts

$3500 to $40000

Min. Credit Score

640

on Credible’s website

View Details

3.93.9

Credible rating

Fixed (APR)

18.00% - 35.99%

Loan Amounts

$1500 to $20000

Min. Credit Score

540

on Credible’s website

View Details

All APRs reflect autopay and loyalty discounts where available | LightStream disclosure | SoFi Disclosures | Read more about Rates and Terms

What is a 0% APR credit card and who can qualify?

A 0% APR credit card has an APR of 0% for a set amount of time for promotional purposes. This usually ranges from 12 months to 18 months, depending on the credit card issuer. After the promotional period ends, a higher APR will kick in. If you are using the credit card to consolidate debt, a balance transfer fee may apply — these are usually around 3% to 5% of the amount you transfer to the card. So, if you transfer $1,000 in debt to your credit card, your balance would be $1,050 after the transfer, if the card has a 5% balance transfer fee.

These cards can be a great and inexpensive borrowing option as long as you can pay off your balance before the promotional perio