Personal loans and credit cards are very much alike in that they both provide easy access to cash that you do not have. Both credit cards and personal loans let you borrow money without offering securities and it's important to understand the pros and cons of both options before deciding which might work better for your situation.

Personal Loan Features

  • Low interest rates. This is the main reason you would want to get a personal loan rather than using your credit card. Most credit cards in Singapore have an interest rate of 24% per annum, though a few offer lower rates. On the other hand, personal loans have an average interest rate of 5%-8%.
  • Borrow up to 4x monthly income. If you earn more than $2,500 a month you will be able to borrow up to 4x your monthly income ($10,000). If you earn less than that, you will be able to borrow up to 2x your monthly income. With credit cards, the credit limit is different for different cards, and also depends on your credit history, so your card limit may be lower than what you get with a personal loan.

You will need to have a number of documents on hand (passport, track record of your tax form, latest account statement, salary slips) and it may take some time till you actually receive the cash.

Are Credit Cards Better Than Personal Loans?

  • More convenient.
    Borrowing money from your credit card is a lot faster and more convenient than applying for a personal loan. If you are getting the loan to make a purchase, you can simply use your card to make the purchase. A credit card lets you get cash advances anytime, and is definitely the easiest way to get a loan.
  • Flexible repayment.
    If you use a credit card to access cash, you normally have the freedom to repay the credit as soon as you like. Sure, the interest rate may be much higher, but if you will have the money to pay back your loan 2 months from now, then the extra couple dollars you pay may be worth it. If you're able to pay off your balance in full before the due date, you won't pay any interest at all.

Personal loans generally come with a strict repayment scheme which usually includes a penalty period for partial or full prepayment of your loan. That means that you will have to pay a penalty fee if you pay off your loan sooner than the amount of time offered. That's because if you were to pay off the loan in 2 months, the lender would miss out on all the money it would have made off interest charges over the full 1-5 year repayment period.

If all you need is immediate cash which you can pay back soon, then a credit card may be the better choice.

As well as providing access to easy loans, credit cards may also give you benefits like rewards on your spending, insurance coverage and access to special discounts and deals. Personal loans sometimes do offer sign-up bonuses (free luggage, etc.) but nothing like the many useful benefits you enjoy when you use a credit card.

Credit cards come with high interest rates if you don't repay in full by the end of the month. Annual interest rates averaging 18-24% (even higher for cash advances) mean that you pay a high price for the convenience of borrowing with your credit card. I strongly suggest that you have a budget and timeframe for repaying your balances if you don't have enough to repay it all by each month's due date. The faster you pay it all back, the less debt you will have.

Our Verdict

If you plan to pay off your loan over a long period, a personal loan provides the cheapest way to do it, as the interest rates are less than half the average rates offered by credit cards.

For more spontaneous loans that can be paid back quickly (e.g. you're expecting a cash windfall in 3 months), a credit card may provide a more flexible solution, since you can pay off your balance in full as soon as you are able. Credit cards are also a better choice if you have to make a fast financial decision, since you can obtain money much quicker than getting a personal loan.

Credit CardFeaturesIntro Interest p.a.Standard Interest p.a.Annual FeeMinimum IncomeWe least likeRelated links
Citibank Rewards Card VISA

Citibank Rewards Card VISA

APPLY NOWAt Citibank's secure website
  • Apply now and get up to S$120 cash back as you spend. Valid for online applications from 1st July 2018 to 31st December 2018 (both dates inclusive), new Citi cardmembers only.
  • Earn 10X Rewards (10 points or 4 Miles for every S$1 spent) when you shop for clothes, bags and shoes or at departmental stores or online shopping websites*.
  • Earn up to 10% Citi Rebate at over 300 locations (including Starbucks and Sheng Siong) on top of your other card benefits.
APPLY NOWAt Citibank's secure website
Transfer your outstanding balances on any other bank's credit card or credit line to Citibank at 0% nominal interest rate for 3/6/12 months with an upfront service fee from 1.58%. Eligible for new Citibank customers who apply for Citibank Ready Credit account with minimum $500 loan26% p.a.$192.60 waived the first yearS$30,000 per annum (Singaporeans and PRs); S$42,000 per annum (Foreigners)
Citi Cash Back Card

Citi Cash Back Card

APPLY NOWAt Citibank's secure website
  • Apply now and get up to S$120 cash back as you spend. Valid for online applications from 1st July 2018 to 31st December 2018 (both dates inclusive), new Citi cardmembers only.
  • Petrol: up to 20.88% fuel savings at Esso & Shell, and 8% cash back at petrol stations worldwide.
  • Dining: 8% cash back at restaurants, cafés, bars worldwide daily.
APPLY NOWAt Citibank's secure website
Transfer your outstanding balances on any other bank's credit card or credit line to Citibank at 0% nominal interest rate for 3/6/12 months with upfront service fee from 1.58%. Eligible for new Citibank customers who apply for Citibank Ready Credit account with minimum $500 loan.26% per annum$192.60 (first year annual fee waiver)For Singaporeans and PRs, minimum annual income of $30,000, for foreigners $42,000.
We least like
  • High cash back rates only if you accumulate a total retail spend of S$888 or more in a statement month.
  • Base cash back rate stands at 0.25%. Additional 7.75% cash back on Dining, Groceries & Petrol spend is capped at S$25 cash back per category per statement month.
HSBC's Revolution Credit Card

HSBC's Revolution Credit Card

APPLY NOWAt HSBC's secure website
  • Welcome gift for new cardholder: Choice of American Tourister Caravan 70cm TSA luggage worth S$260 or S$100 cash back (Must not hold any existing Card*; Did not cancel any Card within last 12 months*; and Charge a minimum of S$600 in Qualifying Transactions within a month of Card Account Opening Date.) | Welcome gift for existing cardholder: S$50 cash back ( Existing Card must be issued more than 24 months earlier*; Did not cancel any Card within last 12 months*; and Charge a minimum of S$600 in Qualifying Transactions within a month of Card Account Opening Date.).
  • 5x Rewards on online transactions, local dining transactions, local entertainment transactions.
  • Earn 1 Rewards point with every S$1 you spend on all other transactions.
APPLY NOWAt HSBC's secure website
2.50% p.a. for 6 months on balance transfers or 4.88% p.a. for 12 months on balance transfers both with a processing fee of $8825.9% p.a.S$150 waived for the first 2 yearsS$30,000 p.a. (Singapore Citizens and PR)