Line of Credit Personal Loans

Have easy access to additional funds whenever you need them with a line of credit personal loan.


A line of credit personal loan may provide you with a convenient way to draw on funds as and when you need to. You can use the funds to consolidate debt, make multiple purchases or as a safety net in case of an emergency.

The flexibility of a line of credit personal loan allows you to withdraw funds up to a predetermined limit. Interest is only charged on the amount you owe, not on the entire credit limit.

Find out more about this type of loan and if it is right for you in this guide.

How does a line of credit personal loan work?

A personal line of credit works much like a credit card, in it gives you a specified credit limit to use how you like. The main difference is the limit is usually higher, while the interest rate is lower in comparison to a credit card. You don’t need to submit a credit application every time you need to make a withdrawal.

Once you are approved, the funds are there for you to use when you need them. The charges are not made against your entire balance, only on the funds you withdraw. You can even get line of credit personal loans that are linked to a debit card, which gives you more flexibility.

How a line of credit varies from a personal loan

How to compare your line of credit loan options

If you are considering a line of credit loan, it is important to compare your options so you get the right loan for you. Here are some features to keep in mind when looking at the accounts available:

  • The interest rate. Not only will you want to compare different interest rates, you will also want to learn how they are applied. Check that interest is applied only to the funds you withdraw, not on your total balance. Also, keep in mind that in some cases you may have the option of securing the loan against an asset, which may result in a lower interest rate.
  • The fees. Compare fees carefully as they are not always set out as clearly as the interest rate. While a line of credit personal loan may advertise no annual fee, there could be monthly fees or an establishment fee. Make a running list of fees for each brand you are considering and factor that into your loan amount. You can use a personal loan calculator to do this.
  • The terms of the loan. There are two different term types to consider. One is known as a term plan, where you have a certain timeframe, usually between one and five years, to pay off the principal of the line of credit. The other line of credit personal loan allows you to keep the loan open as long as you continue to make regular monthly repayments. This is also known as revolving credit and may be ideal if you want a funding source available as a safety net for unexpected expenses.
  • How accessible are your funds? Another thing to consider with this type of loan is how you access your funds. Again, read these terms carefully. A bank may offer a card that can be used at ATMs, but there may be charges applied for this convenience. You need to weigh up the methods of accessing the funds, along with any fees associated with them

Considering the benefits and drawbacks

  • You’re only charged for what you use. In most cases, you are only charged interest on the funds you have borrowed, as opposed to the total loan amount.
  • You have easy access to your funds. If your account is linked to a card, you are able to draw the funds through ATMs and online banking.
  • There are flexible terms. You can use the funds how and when you need to, making for a very flexible financing solution.
  • Fees and charges. Be mindful that fees and charges likely apply, such as an annual fee, establishment fee or a monthly service fee.

What are the risks?

  • Overspending. For individuals with little financial control, the thought of a seemingly unlimited amount of funds may cause them to make unnecessary purchases.
  • Penalties. While the repayments for a line of credit personal loan are generally flexible, you should make sure you read the terms carefully. Most will expect at least monthly repayments and charge penalties if this requirement is not satisfied.

How you can apply

Eligibility criteria differs between lenders, so make sure to check this carefully before submitting your application. Be prepared with the following information, as most lenders have similar criteria for this part of the application:

  • Income. You have to show proof of an ongoing steady income. Payslips are usually acceptable or a bank statement which shows consistent deposits from an employer.
  • Liabilities. You will be asked to provide a complete list of your currents debts.
  • Identification. All lenders want to see a current and valid photo ID of the applicant and in most cases you will need to provide a photocopy for their records.
  • Assets. You need to provide information on property you own, plus cars, savings and investment accounts.

Read more on this topic

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