Which is Easier to Get, a Personal Loan or a Line of Credit?

When you need a financial helping hand, you have a few options. Two in particular are a personal loan and a line of credit. Whether you need this borrowed money to make home improvements, want to consolidate your debt or just need a little extra cash for everyday necessities, it’s important to compare the two. It can help you to determine which option is the better one for you.

What is a Personal Loan?

A personal loan is a specific amount of money that is given to the borrower in a single lump sum. It has a fixed or variable interest rate that is usually very high, as well as a fixed term for repayment of the loan. In general, personal loans are good for consolidating your debt and finally being able to pay it off. Some people also acquire a personal loan when they need extra cash quickly for unexpected expenses.

It’s important to keep in mind that you must have excellent credit in order to get the maximum amount from a personal loan. Generally, you have to borrow at least $3,000. You can also choose among weekly, biweekly, monthly and semi-monthly payments for paying it back. Another aspect to note is that personal loans are secured loans, which means they require collateral on your part. That means you are required to put up property like your car or investments to ensure that the lender is paid back in the event that you default on the loan. This makes a personal loan not the best option for just anyone.

What is a Personal Line of Credit?

A personal line of credit is a flexible loan from a bank or credit union that is treated in the same way as a credit card. It offers you a limited amount of money you can use when you need it and can be repaid immediately or over a specific time. When money is used from a personal line of credit, interest is charged. Unlike with a personal loan, the total amount from a personal line of credit cannot be used all at once.

Lines of credit are generally most appropriate when you have an ongoing project with an unclear total cost. For instance, if you are getting married and are planning your wedding, it might be a good thing to have because you can gradually draw funds as you need them. A personal line of credit is also good for individuals who might otherwise overdraw their checking account.

In general, getting a line of credit can be a quick process and should be done only when your finances are in good standing. You need a good credit score and credit history. Always check your credit report and score prior to applying for a line of credit.

Overall, a personal line of credit is easier to get than a personal loan. You are not required to put up collateral to get a line of credit and you get quick access to funds when you need them.

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