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Personal Loan Vs. Personal Line Of Credit: A Complete Comparison

Published on Mar 9, 2023Updated on Oct 5, 2023

Personal Loan Vs. Personal Line Of Credit: A Complete Comparison

In today's world, it has become easy and quick to avail of external financial support like personal loans from lending institutions to carry out weddings, home renovations, medical treatments, etc. Personal loans and personal lines of credit are two popular options that have gained a lot of popularity in recent years. However, despite being similar in many ways, these two types of loans have some significant differences that are important to understand before making a decision. This article talks about personal loan vs. personal line of credit.

What Is A Personal Loan?

A personal loan is a type of unsecured loan that you can use for various personal reasons, including home improvements, debt consolidation, paying medical bills, or financing a large purchase. Personal loans are usually offered by banks, NBFCs, credit unions, and online lenders. They come with a fixed interest rate, a set repayment period, and a fixed monthly payment.

What Is A Personal Line Of Credit?

A personal line of credit, on the other hand, is a revolving line of credit that you can use whenever you need it. It operates similarly to a credit card, where you are given a credit limit and you only pay interest on the amount you use. Personal lines of credit can be secured or unsecured, depending on the lender's requirements.

Difference In Approval Process

The approval process for personal loan vs line of credit is quite different. For a personal loan, you need to provide detailed information about your income, expenses, and credit history. The lender will then evaluate your creditworthiness and make a decision. In the case of a personal line of credit, the approval process is simpler and quicker but it may not be as reliable as the process for a personal loan.

Difference In Interest Rates

Personal loan interest rates usually stay the same throughout the repayment period. On the other hand, personal lines of credit usually come with variable interest rates, which can fluctuate based on the market. As a result, the interest rate on a personal line of credit can be higher or lower than a personal loan, making it more challenging to budget and plan for the loan repayment.

Difference In Repayment Terms

Personal loans come with a fixed repayment period, typically ranging from 12 to 60 months. This means that you have a set timeline to repay the loan, and you know exactly how much you will have to pay each month. 

On the other hand, personal lines of credit have flexible repayment terms, which can be convenient in some cases but may also make it more challenging to manage the loan repayment effectively.

Must Read: What is the difference between Credit Freeze & Credit Lock?

Difference In Uses

Personal loans can be used for a variety of purposes, such as debt consolidation, home improvements, or paying medical bills. Personal lines of credit, on the other hand, are best suited for short-term needs, such as covering an unexpected expense or financing a small business.

Difference In Accessibility

Personal loans are disbursed in a lump sum and are usually not available for re-borrowing once they are repaid. On the other hand, personal lines of credit are always available for re-borrowing once the credit is repaid, which makes them a convenient option for unexpected expenses. However, this convenience comes at the cost of potentially higher interest rates and less certainty in terms of repayment.

Must Read: Credit Card Loan vs. Personal Loan - Which One is Better?


In conclusion, a personal loan vs a personal line of credit are two popular financial options for individuals seeking additional funds. Choosing one over the other depends on the financial requirements of the borrower. Before choosing either option, it is crucial to assess one's financial needs and goals, credit score, and income stability. Also, it is important to compare different lenders and their loan offerings, including interest rates, repayment terms, and fees, to select the best option.

More often than not, a personal loan is a wise decision to make. With a lending institution like SMFG India Credit, you can make the most of your personal loan with amounts up to INR 25 lakhs*, interest rates from only 11.99%* per annum, and tenures up to 60 months. Before applying, you must ensure that you qualify for the loan by using our online personal loan eligibility calculator. Personal loan documents can include identity and address verification documents, but with minimal requirements, you can take a loan from SMFG India Credit today.

* Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG India Credit. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG India Credit's policy at the time of loan application. If you wish to know more about our products and services, please contact us

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