Personal loan has some differences versus a line of credit. For example, lines of credit offer continuous funds, whereas a loan provides a lump sum. Loans also have fixed interest whereas lines of credit have a variable interest. Lines of credit are ideal for continuous but uncertain costs, and a loan is ideal for single or known costs. 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.What’s Easier to Get: Personal Loan or Line of Credit?
Personal Loan
Line of Credit
Personal Loan vs Line of Credit FAQs
A Personal Loan is a one-time, fixed amount loan with a fixed repayment schedule, while a Line of Credit is an ongoing loan that allows for multiple withdrawals and repayments based on your current credit limit.
A Personal Loan typically provides faster access to funds than a Line of Credit since it can be processed more quickly and has specific repayment terms.
No, both options are unsecured forms of credit so you do not need any kind of collateral to qualify.
With a Personal Loan, interest is charged on the entire loan amount from the date of disbursement. With a Line of Credit, interest is only charged on the amount of money that you actually borrow and use.
Yes, both types of loans will affect your credit score since they are reported to the major credit bureaus. It's important to demonstrate responsible use of either option in order to maintain a good credit rating.
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®), author of The Handy Financial Ratios Guide, 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.
To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.