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Credit Cards vs Personal Loans


Credit cards are a very common way to pay over time for things we need to buy immediately. They’re convenient and widely accepted. If you pay off your credit card balance each month, a credit card can be an affordable way to build your credit profile and finance a purchase you know you can pay off next month.

However, if you tend to pay minimum amounts, or need to pay for something expensive that you won’t be able to pay off next month, a personal loan could be a more strategic and affordable option for you.

Let’s explore.

Carrying a balance can get expensive, quick

If you make minimum payments or tend to carry a balance month to month, it’s really important to understand what it might be costing you.

Interest paid on credit cards is often expressed as the Annual Percentage Rate, or APR, which considers the cost of interest as well as other costs associated with credit, such as certain fees. There is a wide range of rates you could pay, depending on the card brand and your credit history. For example, APR for someone with an excellent credit score, such as above 740, could be 12%. APR for someone with a poor credit score, such as under 580, could be above 30%.* Learn more about our rates and fees.

If you pay the full balance on your credit card every month, on time, you won’t be charged any interest. But if you don’t pay in full, the next month’s balance will include any purchases you made, plus interest on what you didn’t pay last month. That’s why paying the minimum on a credit card, or carrying a balance, can really cost you. It could also take a long time to get out of debt. If you can avoid making minimum payments, you’ll be better off in the long run.

Did you know you could be paying interest on interest?

Credit card interest is compounding interest. That means new interest is calculated on both your unpaid principle amount and any unpaid interest. Most credit card companies add unpaid interest to the principal balance, and therefore do not separate between interest you owe them and the money you borrowed to make a purchase. So, even if the stated APR on your credit card is low, what you ultimately pay in interest could be much higher.

Ever felt like you’re making on-time payments but making no progress?

If you’re making minimum payments on your credit card every month, it could take you a very long time to pay it off. Just take a look at your latest credit card statement to see how long it would take to pay off your card based on minimum payments alone. For many people, it will take years, and they could end up paying far more to borrow the money than the cost of the original purchase.

It’s hard to make progress towards being debt free when you owe more and more interest each month.

Did you know through LendingClub, your interest rate and monthly payments are fixed?


A lot of people come to LendingClub because they need to pay for something expensive immediately, whether planned or unplanned. Having a fixed interest rate and fixed monthly payment for a set loan term can help you stay on track. It makes your monthly cash flow more stable, and helps you avoid skyrocketing interest. You don’t have to worry about compounding interest or your balance increasing. Financial consistency can go a long way to help your peace of mind.

Even more people come to LendingClub to pay down credit card debt and take control of their finances. If you have lots of debt, or have multiple debt payments to make each month, then having only one fixed payment each month might help you get on track to financial stability and improve your credit score. And that’s worth a lot.

Think you might have a debt problem? You're not alone, and we can help.

*According to credit bureau Experian’s online credit score guide.

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