Personal Loan vs. Personal Line of Credit
When you need extra money for personal expenses, two popular options often come up: a personal loan vs. personal line of credit . Though both can provide much-needed financial support, they serve different purposes, have different repayment structures, and offer varying levels of flexibility. Understanding their differences can help you make the right choice based on your situation and financial goals. What Is a Personal Loan? A personal loan is a lump sum of money borrowed from a bank, credit union, or online lender. You agree to repay it over a fixed term usually 1 to 7 years with equal monthly payments. Most personal loans have fixed interest rates , which means your payments remain consistent throughout the loan term. This type of loan is ideal for one-time expenses such as: Home renovation Debt consolidation Wedding or vacation Medical emergencies What Is a Personal Line of Credit? A personal line of credit (PLOC) works more like a credit card. You’re approved for a maxim...