Personal loan vs credit card — which costs less for a fixed purchase?

A fixed purchase — a boiler, a laptop, dental work — often sits between two UK credit products: an unsecured personal loan with a known monthly EMI, or a credit card that revolves until you clear the balance. The monthly cash-flows look similar at first glance. The maths does not. This guide walks one shared EXAMPLE so the lifetime cost and the payoff date are visible side by side. It is illustrative only — not a recommendation, not a credit offer, and not a comparison of named lenders.

Who this guide is for — and who it is not for

Use it when you already know the purchase amount and want to compare a fixed-term personal loan against carrying the same balance on a revolving card. It is aimed at UK readers comparing product shapes, not shopping a rate table.

It is not for 0% purchase offers with a deferred-interest trap you have not modelled, balance-transfer teaser maths (see a separate frame below), mortgages, or anyone seeking affordability advice. LoanCalc Lab is not a lender or broker.

Shared EXAMPLE — £3,500 purchase

Purchase amount: £3,500. Two illustrative paths:

• Path L (personal loan) — £3,500 · 12.9% EXAMPLE annual rate · 36 months · £0 arrangement fee. Reducing-balance EMI.
• Path C (credit card) — £3,500 purchase · 22.9% EXAMPLE purchase APR · you pay a fixed £118 every month until cleared (chosen so the cash-out is close to Path L’s EMI). No promotional 0% period in this EXAMPLE.

Path L’s contractual EMI on those inputs is about £117.80 a month (run the same figures in the EMI calculator). Path C’s £118 is a repayment habit, not a contractual instalment — miss it and interest continues on the remaining balance.

Path L — what the fixed EMI buys you

On a reducing-balance personal loan the EMI is sized so principal reaches zero on the final contractual month if you pay on time. For Path L that means roughly £4,240 total repayable over 36 months and about £740 of interest (EXAMPLE — roundings vary by day-count). You know the payoff month on day one. Fees would change true cost; Path L assumes £0 so the comparison stays readable. See fees & APR — true cost when an arrangement fee appears on a real illustration.

Early settlement is a separate conversation with the lender. The early settlement guide explains the figure shape; Path L does not assume you settle early.

Path C — what revolving interest costs at the same cash pace

A credit card does not amortise to a fixed end date unless you choose a repayment that clears the balance. At 22.9% EXAMPLE purchase APR, interest each month is charged on the outstanding purchase balance (simplified monthly model for illustration — real statements use the card’s day-count and compounding rules). Paying £118 a month from a £3,500 start:

• Early months are interest-heavy; principal shrinks slowly at first.
• Clearing takes on the order of 38–40 months in this simplified EXAMPLE — longer than Path L’s 36 — because the rate is higher even though the cash payment is almost identical.
• Lifetime interest lands roughly in the £950–£1,100 band in this model — visibly above Path L — before any late fees, cash advances or missed payments.

If you only ever pay the card’s minimum (often ~1% of balance plus interest, subject to a floor), payoff stretches for years and interest dominates. The fixed £118 habit is already more disciplined than a minimum; it still loses to Path L on rate and on contractual end date in this EXAMPLE.

Side-by-side summary (EXAMPLE)

• Monthly cash — Path L ~£117.80 contractual · Path C £118 chosen habit.
• Payoff clarity — Path L: month 36 if paid as agreed · Path C: only when the revolving balance hits zero.
• Interest shape — Path L lower EXAMPLE rate on a reducing balance · Path C higher revolving APR for longer.
• Flexibility — Path C wins if you can clear early from a bonus (no early settlement figure). Path L wins if you need a known end date and a lower contractual rate.

When a card can still be the cheaper cash path

Three common cases flip the EXAMPLE ranking — none of them are modelled as Path C above:

• A genuine 0% purchase period you will clear before the promotional rate ends, with the post-promo APR written down so a slip does not surprise you.
• A balance-transfer onto a lower teaser with a known fee — compare fee + teaser months against a personal-loan EMI using the APR / true cost mindset (fee raises effective cost even when the headline looks low).
• You will repay in one or two statements from cash you already have — revolving interest barely accrues, and a loan’s setup friction is pointless.

How to reuse the comparison with your own numbers

1. Put the loan illustration into the EMI calculator (amount, rate, term, fee).
2. On the card side, pick a fixed monthly repayment you can sustain and approximate months to clear at the purchase APR — or use a lender’s repayment tool if they publish one.
3. Compare total interest + fees and months to clear, not the first month’s cash alone.
4. If consolidation of several card balances is the real question, switch to the consolidation break-even guide and its calculator.

What this page does not decide

It does not say a personal loan is “better”, that 12.9% or 22.9% is available to you, or that you should borrow at all. Creditworthiness, existing balances, and lender criteria sit outside the EXAMPLE. Check any real illustration against the lender’s pre-contract information before you treat a monthly figure as a budget line.

Sources for product-norm wording only: MoneyHelper — credit and debt; FCA consumer credit. EXAMPLE figures are illustrative. Last checked 2 October 2026.