Personal Loan vs. Credit Card: Which One is Better & How to Use Them in Malaysia
When facing financial needs, many Malaysians consider either a personal loan or a credit card. Both have their benefits, but choosing the right one depends on factors like interest rates, repayment terms, and financial goals. This guide explains the differences, advantages, and best ways to use them.
1. Understanding Personal Loans & Credit Cards
(A) What is a Personal Loan?
A personal loan is a lump sum borrowed from a bank or financial institution, which is repaid in fixed monthly installments over a set period (usually 1 to 10 years).
✔ Best for: Large expenses such as home renovation, debt consolidation, medical bills, or education fees.
Key Features:
- Fixed repayment schedule
- Lower interest rates compared to credit cards
- Requires approval and documentation
- No revolving credit – once repaid, you must reapply to borrow again
(B) What is a Credit Card?
A credit card is a revolving line of credit that allows you to borrow money up to a set limit. You can use it repeatedly as long as you repay the minimum required amount.
✔ Best for: Daily spending, emergency expenses, and short-term borrowing.
Key Features:
- Flexible repayments (minimum monthly payments allowed)
- Higher interest rates compared to personal loans
- Convenient for small and frequent transactions
- Can earn rewards, cashback, or travel points
2. Personal Loan vs. Credit Card: Key Differences
| Feature | Personal Loan | Credit Card |
|---|---|---|
| Interest Rate | 3.5% – 15% per annum (flat rate) | 15% – 18% per annum (compounded monthly) |
| Repayment | Fixed monthly installments | Flexible, but high-interest if unpaid in full |
| Loan Amount | RM1,000 – RM250,000 | Based on credit limit (usually 2-3x monthly salary) |
| Best for | Large planned expenses, debt consolidation | Daily expenses, emergency funds, rewards |
| Application Process | Requires salary slips, credit check | Easier, but approval depends on credit score |
💡 Tip: If you need structured repayments with lower interest, a personal loan is better. If you need flexible access to credit, a credit card works best.
3. When to Choose a Personal Loan
✔ Debt Consolidation – Combine high-interest debts into one lower-interest loan.
✔ Large Purchases – Home renovation, wedding, education, or medical expenses.
✔ Business Funding – Start or expand a small business.
✔ Lower Interest Rates – More affordable compared to credit card debt.
Best Personal Loans in Malaysia (2025)
| Bank | Loan Amount | Interest Rate | Repayment Period |
|---|---|---|---|
| Maybank Personal Loan | RM5,000 – RM100,000 | 6.5% – 9% p.a. | Up to 6 years |
| CIMB Cash Plus Loan | RM2,000 – RM100,000 | 6.88% – 15% p.a. | Up to 5 years |
| Bank Rakyat Personal Financing-i | RM5,000 – RM150,000 | 4.5% – 6.5% p.a. | Up to 10 years |
| RHB Easy-Pinjaman Ekspres | RM2,000 – RM50,000 | 8% – 14% p.a. | Up to 5 years |
🔹 How to Apply for a Personal Loan?
1️⃣ Check your credit score (CTOS/CCRIS)
2️⃣ Compare personal loans online (RinggitPlus, iMoney, Loanstreet)
3️⃣ Prepare documents (IC, salary slips, tax form)
4️⃣ Apply online or at the bank
5️⃣ Wait for approval (5-7 working days)
4. When to Use a Credit Card?
✔ Daily Expenses – Groceries, petrol, dining, and online shopping.
✔ Emergency Use – Medical bills, urgent repairs, or unexpected travel.
✔ Rewards & Cashback – Earn points, travel miles, or cashback on spending.
Best Credit Cards in Malaysia (2025)
| Bank | Credit Card | Benefits |
|---|---|---|
| Maybank 2 Gold Cards | 5% weekend cashback, free travel insurance | Best for cashback & rewards |
| CIMB Travel World | 10x points on overseas spending | Best for travelers |
| Public Bank Visa Signature | 6% cashback on dining | Best for food lovers |
| HSBC Platinum | 8x rewards on groceries & shopping | Best for daily expenses |
🔹 How to Use a Credit Card Wisely?
✅ Always pay the full balance to avoid high interest.
✅ Choose a card with rewards that match your spending habits.
✅ Keep credit utilization below 30% of your limit.
5. Which One is Better for You?
| Situation | Personal Loan | Credit Card |
|---|---|---|
| Need structured repayments | ✅ Yes | ❌ No |
| Large one-time expenses | ✅ Yes | ❌ No |
| Frequent small purchases | ❌ No | ✅ Yes |
| Rewards & cashback | ❌ No | ✅ Yes |
| Lower interest rates | ✅ Yes | ❌ No |
🔹 If you need a large sum with fixed repayments → Choose a Personal Loan
🔹 If you need flexible spending with rewards → Choose a Credit Card
Conclusion: Use Them Smartly!
✔ Use a Personal Loan for large, planned expenses that require structured repayments.
✔ Use a Credit Card for everyday spending, short-term financing, and earning rewards.
✔ Avoid high interest by paying off debts on time and comparing loan/credit options.
💡 Tip: If you have credit card debt, consider taking a balance transfer or debt consolidation loan to reduce interest.
By making informed choices, you can manage finances wisely and avoid unnecessary debt burdens! 🚀
