Personal Loan vs Personal Line of Credit: Know the differences and how to choose between them

There are many types of loans available in the markets; two of them are Personal Loan and Personal Line of Credit.

One should avoid taking loans for casual spending and for meeting the urge of buying luxury items on credit. However, there is no harm in taking loans for buying capital goods, increasing earning capacity etc.

There are many types of loans available in the markets; two of them are Personal Loan and Personal Line of Credit.

Nitin Mathur, CEO, Tavaga Advisory Services describes the differences between the two credit facilitates and their suitability.


A personal loan is a type of credit where the borrower gets a fixed lump sum amount and is required to repay it at a fixed payment amount over a specified period. It is generally unsecured in nature.

A Personal Line of Credit (PLOC) allows you to borrow up to your maximum limit, repay the funds and draw them again as required. Lines offer the borrower flexibility when borrowing. These are a type of revolving credit – just like a credit card.

Personal loans carry fixed interest rates, while PLOC usually has variable rates over time. You get lower interest rates with a high credit score.

The major difference between the two is that, to be approved for a line of credit lenders may require your credit to be in better shape.


If you prefer certainty of interest pay-outs and require a certain sum of money in one go, then personal loan is for you. If you are comfortable with floating interest payment and need flexibility in drawing money, then PLOC is your go-to option.

At times a line of credit might be a preferred choice based on the need to borrow money, and at other times personal loan will be a better fit. Understanding the difference between them can go a long way toward helping you choose the option that’s best for you.

Giving his response on the issue, Anil Pinapala, CEO & Founder of Vivifi India Finance, said, “A personal line of credit offers the flexibility to time your repayments unlike an EMI based loan, which forces a fixed amount and a fixed time frame for repayment. In addition to the flexibility in repayment, a line of credit offered by FlexPay is also available on-demand without the need to apply for a loan each time if you want to use credit to finance your needs from time to time.”

“Switch over to a line of credit for smaller needs helping you tide over the month-end blues or when you are struggling through tough times and do not want the burden of an EMI loan. Whatever may be the situation, be responsible for your repayment obligations as it impacts availability of credit for all future needs,” he added.

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