Personal Loan vs Line of Credit

Written by True Tamplin, BSc, CEPF® | Reviewed by Editorial Team

Updated on December 13, 2022

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 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 Loan

  • Lump sum
  • Fixed interest
  • Regular payments of the same amount
  • Interest charged on whole amount
  • Ideal for single or known expenses

Line of Credit

  • Continuous funds
  • Variable interest
  • Minimum monthly payment
  • Interest charged on money spent
  • Ideal for ongoing but uncertain expenses

Personal Loan vs Line of Credit FAQs

What is a line of credit?

A line of credit is money lent to an individual or business. If a line of credit is revolving, then the line of credit will replenish as the borrower pays back money borrowed.

What does LOC stand for?

The acronym LOC stands for Line of Credit.

What is a revolving line of credit?

A revolving line of credit is one which replenishes when the loan is paid off. An example of this is a credit card. A non-revolving line of credit closes once the loan is paid off, such as a student loan.

What's the difference between a line of credit and a loan?

A loan is typically a lump sum whereas a line of credit is typically revolving which allows for the borrower to draw, repay, and again draw as needed.

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®), 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.

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