What does a loan really cost next to a card?
A car loan of $8,000 at 7% over 36 months costs $893 in interest. Put the same $8,000 on a 24% card at the same $247 a month and it takes 53 months and costs $5,016 in interest.
The worked example
$8,000 borrowed two ways: a car loan at 7% over 36 months with no fees and no late payments, or a credit card at 24% paid at the loan’s monthly payment until it is gone. Below that, an $8,000 personal loan at 12% over 36 months with a 5% origination fee and 2 late fees of $30.
| You put in | |
|---|---|
| Amount | $8,000 |
| Car loan | 7% over 36 months |
| Card APR | 24% |
| The car loan | |
| Loan monthly payment | $247 |
| Loan: first month’s interest | $47 |
| Loan: total interest | $893 |
| Loan: total paid | $8,893 |
| The card, paid at $247 a month | |
| Card: first month’s interest | $160 |
| Card: time to pay off | 53 months (about 4.4 years) |
| Card: total interest | $5,016 |
| Card: total paid | $13,016 |
| Extra interest on the card | $4,123 |
| Extra months on the card | 17 months |
| An $8,000 personal loan at 12% over 36 months | |
| Personal loan: monthly payment | $266 |
| Personal loan: origination fee | 5%, $400 |
| Personal loan: cash you receive | $7,600 |
| Personal loan: 2 late fees of $30 | $60 |
| Personal loan: total cost | $9,626 |
| Personal loan: cost above the cash received | $2,026 |
Every figure on this page is computed from these inputs by the same calculator the channel’s Shorts use.
Run your own numbers
There is no calculator for this comparison on the site yet. These run each part with your own numbers:
- Credit card payoff calculator
Runs the card side: the amount as the balance, the card’s APR, and the loan payment as the monthly payment.
Educational content, not financial advice.
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Your next moves
Get the loan’s real rate and term
The payment and the interest both follow from those two numbers.
Run the card side
Use the amount as the balance and the loan payment as the monthly payment.
Credit card payoff
How the math works
A loan is amortized: the payment is fixed so the balance reaches zero in the last month of the term. At 7% over 36 months, $8,000 needs $247 a month. In the first month $47 of that is interest and $200 comes off the balance, and the interest share keeps falling from there. Over the whole loan the interest is $893.
A card has no term. It charges interest on whatever you owe, and the payoff date depends only on the payment. At 24%, the same $247 loses $160 to interest in the first month, leaving $87 for the balance, so the card takes 53 months and $5,016 of interest to clear.
A personal loan is amortized the same way, with two costs on top. The origination fee, here 5% or $400, comes out of the money you receive, and each late payment adds a fee: 2 late fees of $30 add $60.
What people get wrong
The tempting comparison is the monthly payment: the same $247 on both, so they feel the same. The difference is where the money goes. On the loan, $47 of the first payment is interest; on the card, $160 is.
With a personal loan, the fees are the part people skip. An origination fee usually comes out of the money you receive, so you repay the full loan on less cash, and late fees land on top of the payments. The second example shows both.
How to read the result
For a loan against a card, compare the total interest, then the months: here the card costs $4,123 more and takes 17 months longer for the same purchase.
For a personal loan, set the total cost against the cash you actually receive. On $8,000 at 12% with a 5% fee, you receive $7,600 and repay $9,626 with the late fees: $2,026 more than the cash in hand. There is no loan calculator on the site yet; the payoff calculator runs the card side with your own numbers.
Questions
Is it cheaper to put a car on a credit card than to take a car loan?
Not when the card charges its regular rate. In this example the card costs $5,016 in interest against $893 on a 7% car loan, paying the same $247 a month.
How much interest does an $8,000 car loan cost?
At 7% over 36 months, $893: the payment is $247 a month and the total paid is $8,893.
What does an origination fee do to a loan’s cost?
It usually comes out of the money you receive, so you repay the whole loan on less cash. On $8,000 at 12% over 36 months, a 5% fee of $400 means you receive $7,600 and still pay $266 a month.
Can I run the card side with my own numbers?
Yes: the credit card payoff calculator does it. Use the amount as the balance, the card’s APR, and the loan payment as the monthly payment.
Interest compounds monthly at APR ÷ 12 and each payment lands at the end of the month, after that month’s interest. The car loan has no fees and is paid on time; the card has no promo rate and nothing else is charged to it. In the personal loan, the origination fee comes out of the money received. Disclaimer