Personal Line of Credit vs. Personal Loan

Credit card being held, personal line of credit vs. personal loan

When a consumer’s vehicle breaks down, their house needs a costly repair, or other unforeseen expenses arise, they might not have the funds to cover the costs. A personal loan or line of credit can help them make ends meet.

There are many loan options available and trying to decide on which one is right for you can be overwhelming. Consumers should educate themselves on the differences between loan options to make the best choice.

What Is a Personal Loan?

A personal loan refers to the money a consumer borrows from a financial institution.

When Would Someone Get a Personal Loan?

When a consumer gets a personal loan, they typically receive the funds in one lump sum. Most personal loans are unsecured, which means the consumer is not required to put up collateral to be approved for the loan. Some, however, may be secured loans. Some examples of secured personal loans are mortgages and vehicle loans.

Benefits of a Personal Loan

Personal loans can be helpful to consumers. Three benefits of choosing a personal loan are: The money from a personal loan can be delivered quickly. Borrowers can often be approved and receive the funds by the following business day*.

Interest rates are usually fixed. While there are some variable interest rate personal loans (for example, some mortgages have variable rates) most of them are fixed. This helps the borrower budget, knowing that every payment will be the same until the debt is paid off.

No collateral needed. Most personal loans are unsecured. If the borrower does not pay off the loan, they will not have their assets seized like they could with a secured loan.

What Is a Line of Credit?

A line of credit is a set amount of money made available to a consumer by a lender. Lines of credit can be either unsecured or secured by a piece of collateral. A home equity line of credit (HELOC) is an example of a secured line of credit. When a person has an open line of credit, they can withdraw funds at their discretion from their available balance.

How to Get a Line of Credit?

Consumers interested in a line of credit should visit their financial institution and complete an application. Getting approved for a credit line may take a few minutes to several days, depending on the lender's underwriting process.

Benefits of a Line of Credit

Two of the most valuable benefits a line of credit offers are:

Flexibility. The borrower has access to funds when they need it and can draw from the line of credit, up to the credit limit.

Convenience. Having access to the funds to pay for expenses and other life events gives a consumer security and peace of mind.

How Are Personal Loans and Lines of Credit Different?

While lines of credit and personal loans are similar, the main difference is the way in which the consumer receives the money. Lenders deliver a personal loan to the borrower in a single lump sum, whereas a borrower can take advances from a line of credit up to their limit.

FAQs

Is a Line of Credit Considered a Loan?

A personal line of credit is designed to be a flexible loan type where your funds can be borrowed up to the credit limit and paid back over time.

Can I Use My Line of Credit to Pay Bills?

Using a line of credit to pay bills is a common occurrence today.

Apply Through Integra Credit For Your Next Personal Loan or Line of Credit

Understanding how personal loans and a line of credit work help consumers choose the best option. Integra Credit offers a seamless application process. Apply today.

Recent Posts

What is a Soft Credit Inquiry?

While your credit score is only three digits, it can impact every facet of your life. From purchasing a car to renting an apartment to finding employment, your credit score may be a determining factor. That's why it's critical to understand how credit works and the factors that can negatively impact it, such as credit inquiries. A credit inquiry is any request by an authorized party to access your credit report and score. Read on to learn more about soft credit inquiries and their implications.

Read More >
What Is a Credit Report?

A credit report is like a history book, but instead of being about rulers, civilizations, or wars, it’s a history of your ability to manage debt. Lenders and other companies will open this book, review your past debt management, and then decide if you’re a good bet to do business with. This history book includes the records of how well you pay your bills, your amount of debt, what types of debt you have, and the age of your credit accounts. If a payment has been 30 days late or you have a perfect payment history, these things are reflected on the report and could result in very different outcomes when applying for future credit. From this past credit management experience comes a three-digit number called a credit score which has a significant impact on your ability to qualify for new credit.

Read More >
How Long Does a Credit Card Balance Transfer Take?

We’ve all seen credit card solicitations promising a balance transfer with low or zero interest on the amount transferred for a specific period of time. People have several reasons why they transfer their balances, sometimes for convenience or potential financial savings, but it can be unclear how long the actual transfer will take. Let’s talk about how balance transfers work, the types of balance transfers, how long the process usually takes, and when it isn’t a good idea to utilize a balance transfer.

Read More >

Apply Quickly & Securely

Apply Quickly
& Securely

Fast, short and
secure application
Instant approval
decision
Choose how much
cash you need
Money in your account
as early as tomorrow*