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Which One to Choose: Personal Loan vs. Line of Credit?

These 2 types of financing are among the most common options people choose to apply for. This article is about a personal loan vs. line of credit. So, let’s start reading.

Personal Loan

In this case, you get money upfront and you’ll be required to pay back the fixed amount based on a schedule within a set period of time. Besides:

  • You’ll be responsible for payments regardless of when or how you use the money
  • You’ll be offered a set interest rate
  • The rates are usually lower as compared to those associated with a line of credit
  • You can easily account for the regular payment cost

Line of Credit

In this case, you receive your maximum limit, pay off the funds and may receive money again if you’re in need of it. Besides:

  • Since you get access to credit up to a limit, you can still go on using a line of credit after you’ve paid down the balance
  • You often enjoy more convenience with a line of credit than with a personal loan because you aren’t required to pay interest on money you don’t need
  • Your line of credit will still be there after the credit limit is used up
  • Usually comes with lower minimum payments as compared to a personal loan
  • It’s possible to avoid interest by paying off the total balance on a monthly basis.

These 2 funding options have more than one difference, and your eligibility for them is based on different criteria. The basic difference lies in the following: your credit may play a decisive role in the approval process when applying for a line of credit.

Of course, these aren’t the only funding options to consider for your company. To get fast and easily approved for additional working capital, turn to a reliable alternative online lender like

If you have questions about a personal loan vs. line of credit, FAM can help you with that. FAM is an award-winning alternative business funding provider and processor specializing in the high risk field.

To sum up, some people think personal loans and lines of credit don’t differ from each other. The most vivid difference between these 2 funding options is that a personal loan implies getting the whole money upfront in one lump sum.