Personal Loan vs Line of Credit
Personal loan has some differences versus a line of credit.
Loans also have fixed interest where lines of credit have variable interest.
Lines of credit are ideal for continuous but uncertain costs, and a loan is ideal for single or known costs.
What’s Easier to Get: Personal Loan or Line of Credit?
Personal loans and personal lines of credit are similarly difficult to get.
Both require a healthy credit score, good credit history, and a certain demonstrable income.
The bigger concern is how they should be used; lines of credit are ideal for continuous but uncertain costs, and a loan is ideal for single or known costs.
Personal Line of Credit
- Continuous funds
- Variable interest
- Minimum monthly payment
- Interest charged on money spent
- Ideal for ongoing but uncertain expenses
- Lump sum
- Fixed interest
- Regular payments of the same amount
- Interest charged on whole amount
- Ideal for single or known expenses
Personal Loan Versus Line of Credit FAQs
What Is a Line of Credit (LOC)?
What Is a Line of Credit and How Does it Work? Revolving vs Non-Revolving
Lines of credit will either remain open, or will close, once the loan has been repaid.
Revolving lines of credit are considered “revolving”because an individual’s credit is replenished when some or all of the outstanding debt has been paid off.
Non-revolving credit usually has a lower interest rate.
How does a Line of Credit Work? Secured vs Unsecured
Credit card loans are almost always unsecured, which causes creditors to take on more risk and is why credit card interest rates are generally higher and the borrowing limits are generally lower than secured loans.
Using Credit Lines More Responsibly
While a high line of credit can be an indicator of a business’ ability to pay, it is important to be cautious about its risks, too. Learn how you can be more responsible with your credit line by connecting to a financial advisor in Terre Haute, IN. If you live outside the area, please feel free to browse through our financial advisor page instead.
Understanding a Credit Line FAQs
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.