When should I choose a personal loan over a line of credit?

Choose a personal loan when you know exactly how much you need, want fixed payments, and have a specific one-time expense like debt consolidation, medical bills, or home renovation.

When is a line of credit better?

Lines of credit work best for ongoing or unpredictable expenses, emergency reserves, home repairs over time, or business needs where you want to minimize interest by borrowing only as needed.

Which has lower interest rates?

Personal loans typically offer lower rates, especially fixed rates. Lines of credit often have variable rates that can increase over time.

Can I pay off a line of credit early?

Yes, and you should. Unlike personal loans with set end dates, lines of credit are revolving and require discipline to pay down completely.

Personal Loans vs Lines of Credit

Compare personal loans and lines of credit. Understand when each option makes sense and which is right for your borrowing needs.

Check Your Rates

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Personal Loan

Fixed payments for easy budgeting
Set payoff date
Often lower interest rates
Discipline built into repayment
Good for one-time expenses
Less flexibility
Must reborrow if you need more
May have origination fees
Interest on full amount immediately

Best For:

One-time expenses with a specific amount needed, like debt consolidation or home improvements

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Line of Credit

Borrow only what you need
Pay interest only on what you use
Reusable as you repay
Flexible draw amounts
Good for ongoing expenses
Variable rates common
Easy to over-borrow
No set payoff date
Requires discipline to pay down

Best For:

Ongoing or unpredictable expenses, emergency fund backup, or business needs

Side-by-Side Comparison

Feature	Personal Loan	Line of Credit
Payment Structure	Fixed	Variable minimum
Interest Charged On	Full amount	Only used amount
Borrowing Flexibility	Fixed amount	Draw as needed
Budgeting Ease	Easier	Harder
Interest Rates	Usually fixed/lower	Often variable
Payoff Timeline	Set end date	Revolving
Best for One-time Expense	Yes	Less ideal

Frequently Asked Questions

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