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

by in Uncategorized December 1, 2022


If you need money, consider a personal loan or line of credit. What distinguishes them? Choose one. We’ll explain everything so you can decide.

Personal loan basics

Personal loans can be repaid. You repay creditor loans with interest. Take the money. A personal line of credit lets you borrow money whenever you need it. You can pay off a line of credit monthly. Personal loans have fixed monthly payments so that late payments won’t increase interest.

Line of credit basics

A line of credit lets you borrow and repay money as needed. You can pay more than the minimum. Interest is added monthly to the borrowed amount. Credit and income determine your maximum loan amount. If you borrowed $20,000 at 5% for 10 years, your monthly payments would be $1,078. Interest rates depend on credit score and debt-to-income. Good credit means lower rates. Paying off debt before applying for a new loan or line of credit may lower your rates.

Personal loans vs. lines of credit.

First, distinguish a personal loan from a personal line of credit. Unlike a line of credit, a loan has fixed interest rates. Loans cost more than lines of credit. They also differ in what you can borrow and how much it costs. Personal lines of credit have lower minimum payments but higher maximum payments than personal loans. Riskier lenders charge higher interest rates for them. This may work if you need extra cash, can’t pay off your balance each month, or need flexibility for unexpected expenses like medical bills or auto repairs.

What’s best for you?

Personal loans are good for quick repayment, with a 3.99% APR to $35,000 (annual percentage rate). For monthly withdrawal flexibility or long-term savings, get a line of credit. Unlike most credit cards, you can withdraw money anytime and pay less interest. Instead of a loan, get a line of credit.


Consider the pros and cons before taking out a loan. Personal loans with higher interest rates are best for those who don’t want monthly payments. Lines of credit have lower limits, higher fees, and more flexibility. If you’re still unsure, consult a financial advisor who can help you choose based on your needs.