Should I get a personal loan or a line of credit?

by in Uncategorized December 1, 2022


If you’re looking to borrow money, a personal loan in Singapore or line of credit might be the right fit. But what are the differences between them? 

And which one should you choose? We’ll break down all the key details so that you can decide for yourself.

Personal loan basics

A personal loan is a type of debt that you take out and then repay. You borrow money from a creditor (for example, your bank or credit union), and pay it back with interest. You can use the money for any purpose that you wish.

The main difference between a personal line of credit and a personal loan is that a line of credit allows you to borrow money as needed throughout the course of your relationship with the creditor. With a line of credit, you don’t have to make all your payments at once;

 instead, you can make one or more payments each month until your balance reaches zero again.

A personal loan has fixed monthly payments over an agreed-upon time period so there’s no risk of accruing additional interest by not making all your payments on time every month you know exactly how much you’ll pay each month!

Line of credit basics

A line of credit is a revolving credit account, meaning you can borrow and repay as needed. 

You can also choose to pay more than your minimum payment. Interest accrues the amount borrowed and is charged monthly on the outstanding balance.

The maximum amount you can borrow depends on your credit score and income level. 

For example, if you’re looking for $20,000 at an annual interest rate of 5% over 10 years, your monthly payments will be $1,078.

Your interest rate depends on your credit score and other factors, like your debt-to-income ratio. If you have good credit, expect to pay a lower interest rate than someone with bad credit.

You also may get lower rates by paying off some of your existing debt before applying for a new loan or line of credit.

The differences between a personal loan and a line of credit.

The first thing to know is that a personal line of credit and a personal loan are different. The big difference is the interest rate:

 A line of credit has variable rates, while a loan has fixed interest rates. That means you’ll pay more in total if you take out a loan than if you get a line of credit.

Another difference between the two types is how much money they let you borrow and how much it costs to borrow that money. 

Personal lines of credit generally have lower minimum payments compared with personal loans, but higher maximum payments. 

They also charge higher interest rates than most loans do because they’re riskier for lenders. 

But if you need extra cash on hand and can’t afford to pay down your balance every month or want some flexibility for emergencies like medical bills or car repairs, then this might not be an issue for you at all.

How to determine which option is best for you.

If you have a short-term need and need to pay off the loan quickly, consider a personal loan. 

You can get up to $35,000 with rates starting at 3.99% APR (annual percentage rate). If you’re looking for long-term savings or want flexibility on how much money you take out each month, get a line of credit. 

You’ll be able to access your funds whenever they’re needed and pay less interest than what’s charged on most credit cards.

If you have a high-interest rate on the loan or plan to use it for more than five years, then choose the line of credit instead—it’ll save you money in the long run.


The main takeaway here is that you need to understand the pros and cons of each type of loan or line of credit before choosing one. 

A personal loan may be best for people who don’t want to make monthly payments, but it has higher interest rates than other types of loans. 

Line of credits are typically more flexible, but they have lower limits and higher fees. If you’re still unsure which option is right for you, consider speaking with a financial advisor who can help guide your decision process based on your unique needs.