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Comparing Credit Cards and Personal Loans

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When we find ourselves in a spot of financial difficulty, where do we go to find the best solution? This is a question many of us face at some stage in our lives, and whether it’s looking for a credit card or a loan, there are so many options to compare in the market. It’s very confusing for a consumer to find the best product for their personal needs. This article provides a steer on the key differences between credit cards and online loans.

Key Differences Between Credit Cards and Online Loans

Key Differences

Credit Cards

Online Loans

Interest Rates Around 15% to 25% Rates typically start from as low as 6.49% p.a. for secured loans and can go as low as 6.95% per annum for unsecured loans. The lowest unsecured personal loan rate found in Finder’s database is 10.78% p.a.
Repayment Terms Revolving credit, with minimum monthly payments varying based on outstanding balance. 16 days up to 7 years
Fees and Charges Annual fees, late payment fees, cash advance fees, foreign transaction fees, etc. Establishment fee of $400 or 20% (capped at $400), and monthly loan fee of 4%
Eligibility Criteria Generally based on credit score, income, and credit history Consider credit score, income, employment status, and debt-to-income ratio
Flexibility and Usage Can be used for various purchases, online transactions, and cash withdrawals. Typically used for specific purposes such as debt consolidation, home improvements, or major purchases
Rewards and Benefits Often include rewards programs, cashback, travel miles, and purchase protections, depending on the card Some lenders offer loyalty rewards programs where borrowers can earn points or benefits with each loan they obtain
Impact on Credit Score Responsible users can improve credit score; missed payments or high balances can hurt your credit score Payment history affects credit score, but installment loans may positively impact credit mix and history
Application Process Typically applied for through banks or financial institutions online or in-person Applied for online through lenders’ websites or platforms, with documentation and verification required.

Credit Cards

If you are looking for a credit card, make sure you request a ‘key facts’ sheet from each provider, so you compare and contrast their fees, interest rates and features. These should include:

  • minimum repayment
  • the interest rate that applies to purchases/cash advances/balance transfers (for how long)
  • promotional interest rates (if any)
  • length of the interest-free period (if any)
  • annual and late payment fees (if any).

When paying off your credit card, always try to budget and be disciplined to pay off the full amount owed each month. By doing so, you will avoid additional interest charges and reap the benefits of any interest-free periods. As a result of this, you will pay off your debts faster, although you may only be able to pay off the monthly minimum repayments. Should this be the case, keep a lookout for a card with a lower interest rate and pay off more of the balance when possible. Try to avoid withdrawing cash on your card, as cash advances have no interest-free periods, and the interest rates can be very high. You are also likely to pay a fee when using an ATM.

If you run up $500 on your credit card with typical terms with minimum repayments of 2.5% of the outstanding amount. You then decide to stop using that card, so you can pay off what you owe. Interest is charged at 16% per annum for the date of purchase (unless you pay the full balance off each month), and there are no additional fees on the account. By making only the minimum repayments, you’ll pay about $421 in interest on top of the $500 originally borrowed – or $921 in total which will take you around 5 years to pay off that card. By paying just $37.50 a month, you’ll pay off the balance within 15 months and pay only $46 in interest. That’s a saving of $375.


Should you be considering taking out a loan, always be aware of the following fact checklist:

  • total amount to be paid back over the lifetime of the loan
  • interest rate
  • establishment fees (if any)
  • ongoing fees
  • what happens if interest rates rise?
  • how can I pay off my loan faster?

Lenders should provide a comparison of all repayment options. Depending on the type of loan you choose, repayment options always be presented to the consumer. The comparison rate will include the interest rate or monthly payment amount, plus additional fees and charges. A loan with a lower interest rate but with higher fees and charges could be more expensive than an option with a higher interest rate.

As of 1st July 2013, new national interest rate caps were enforced, meaning providers could not charge an interest rate of more than 48% on the loan’s interest. Additionally, there is a cap on costs, which depends on the type of credit provider you choose. However, some exemptions such as ADIs (Authorised Deposit-taking Institutions) exist. These providers don’t have caps on interest rates and costs. They fall under some banks, building societies and credit unions. Also not limited to continuing credit contracts like credit cards.

From 1st March 2013, credit contracts where the provider is not an ADI, the credit limit is less than $2,000 and the term is less than 15 days are now forbidden.

Bank Loans and Online Loans

Bank Loans

  • Application Process: Usually involves visiting a bank branch or applying online through the bank’s website. Documentation submission and verification are required.
  • Eligibility Criteria: Banks typically require a good credit score, stable income, employment history, and collateral for secured loans.
  • Interest Rates: Banks offer competitive interest rates, varying based on the type of loan, creditworthiness, and market conditions.

Online Loans

  • Application Process: Applied for online through the lender’s website or platform. Requires filling out an application form and providing necessary documentation digitally.
  • Eligibility Criteria: Online lenders consider credit score, income, and employment status, and may have less stringent criteria compared to banks.
  • Interest Rates: Online lenders may offer higher interest rates compared to banks, but they often provide faster approval and funding.

Helpful Tip 💡If you are looking to apply for a loan, applying through Friendly Finance can help you save time and effort when searching for a lender. Our streamlined process can find you your lender match in a matter of seconds, and you’ll only need to fill up one simple application form. NO CREDIT CHECKS REQUIRED!

Recommended Banks in Australia for Loans

  • Commonwealth Bank (CBA): CBA is recommended for its wide range of loan products, including personal loans, home loans, and car loans, catering to various financial needs. Their user-friendly online platform and efficient customer service make the loan application process smooth.
  • Westpac (WBC): Known for competitive interest rates and flexible loan terms, Westpac offers personalized loan solutions tailored to individual requirements. Their extensive branch network and digital banking services ensure accessibility and convenience for customers.
  • Australia & New Zealand Banking Group (ANZ): ANZ stands out for its comprehensive loan options and innovative banking solutions. Customers benefit from competitive rates, streamlined application processes, and ongoing support from dedicated loan specialists.
  • National Australia Bank (NAB): NAB is recognized for its customer-centric approach and commitment to transparency. With a focus on affordability and flexibility, NAB offers attractive loan packages and convenient repayment options, ensuring customer satisfaction.

Recommended Online Lenders in Australia

  • Fundo: Fundo is recommended for its fast funding and hassle-free application process. They offer competitive interest rates and flexible repayment terms, making it convenient for borrowers to access funds for various purposes.
  • Moneyspot: Moneyspot is known for its quick approval process and convenient online application. They offer transparent terms and competitive rates, catering to individuals seeking immediate financial assistance.
  • CashnGo: CashnGo provides fast and reliable loan solutions with minimal documentation requirements. Their convenient mobile app and efficient customer support ensure a seamless borrowing experience.
  • MoneyMe: MoneyMe offers personalized loan options with quick approval and flexible repayment terms. Their user-friendly online platform and transparent fee structure make them popular among borrowers.
  • Cigno Loans: Cigno Loans specializes in providing short-term loans with rapid approval and minimal paperwork. They cater to individuals with urgent financial needs, offering convenient access to funds without extensive credit checks.

Responsible Borrowing Practices

Credit Cards

  • Understand Your Limit: Be aware of your credit limit and only spend what you can afford to repay in full each month to avoid accruing high-interest debt.
  • Regularly Monitor Statements: Keep track of your spending by reviewing credit card statements regularly. Report any unauthorised transactions immediately to your provider.
  • Pay On Time: Ensure timely payment of your credit card bills to avoid late fees and negative impacts on your credit score. Setting up automatic payments can help in this regard.
  • Avoid Cash Advances: Steer clear of using credit cards for cash advances as they often incur high fees and interest rates from the moment you withdraw the cash.


  • Assess Affordability: Before taking out a loan, carefully assess whether you can comfortably afford the repayments based on your income and expenses.
  • Compare Offers: Shop around and compare loan offers from different lenders to find the most suitable terms, including interest rates, fees, and repayment schedules.
  • Read Terms and Conditions: Thoroughly read and understand the terms and conditions of the loan agreement, including any associated fees, penalties, and the total cost of borrowing.
  • Avoid Overborrowing: Borrow only what you need and refrain from overextending yourself financially to minimise the risk of defaulting on repayments.