Personal Loans vs Credit Cards: Which One Works for You?

Posted by Hippo on 7 March 2025

Man depositing coins into a blue piggy bank to illustrate savings growth.

When you need extra cash, the options are usually right in front of you - your credit card or a personal loan. But which one makes sense for your situation? The answer depends on what you need the money for, how you plan to repay it, and - let’s be real - how disciplined you are with your finances.

Let’s break it down.

The Case for Credit Cards: Convenience, but at a Cost

Credit cards are the go-to option for everyday expenses, unexpected costs, and those "I'll pay it off next month" purchases. They’re quick, widely accepted, and often come with perks like rewards and travel insurance. But (and it’s a big but), they can also be an expensive way to borrow if you’re not paying your full balance every month.

With interest rates in South Africa ranging from 18% to 27% or more, an unpaid balance can quickly snowball into a much bigger debt. And since credit cards offer revolving credit, it’s easy to fall into the habit of spending more than you planned, leading to a cycle of minimum payments and mounting interest.

The Case for Personal Loans: Planned and Predictable Payments

If you need a set amount of money for a once-off expense - like a home renovation, medical bill, or school fees - a personal loan could be the way to go. The biggest advantage of a personal loan is the structured repayment plan. Unlike credit cards, personal loans come with fixed monthly payments and a clear end date, so you know exactly when you’ll be debt-free.

Personal loan interest rates vary based on your credit profile, but they generally range from 11% to 28%, which could be lower than what you’d pay on a credit card if you’re carrying a balance. Plus, since you’re getting a lump sum instead of a revolving credit line, there’s less temptation to keep borrowing.

How To Choose Between a Credit Card and Personal Loan

So, What’s the Right Choice? It depends. If you need short-term flexibility and can pay off your balance in full each month, a credit card works. But if you’re looking for a clear-cut repayment plan with potentially lower interest rates, a personal loan might be the better fit.

And if a personal loan is the route you’re taking, don’t just go with the first lender you find. That’s where Hippo comes in. Instead of sifting through endless loan offers (or worse, falling into the trap of an unregulated lender), Hippo lets you compare trusted, vetted financial service providers in one place, quickly and easily.