comparing-loans

Personal loan vs line of credit

Which works better? A line of credit or personal loan? The answer is always in the details.

With the extreme variety in today’s financing options, it can get very confusing when deciding between two basic personal finance options: personal loans or lines of credit. Each has its own advantages and disadvantages, but making the wrong choice could be very expensive. So choosing the most appropriate option for your particular situation could potentially save you thousands in interest repayments and fees.

The main points of difference

  • Loan term. Personal loans have a fixed term, anywhere between one and seven years, and they’re paid back in full by the end of that term. However, lines of credit don’t come with a “term” and the funds you borrow become available again after they’re repaid (plus interest).
  • Repayments. Both involve monthly repayments. However, personal loans have fixed monthly repayments while lines of credit depend on the previous balance, amount drawn, accruing interest and other factors.
  • Time of disbursement. With personal loans, your lender will disburse your funds upfront as soon as you agree on the loan contract and sign it. With lines of credit, you’re able to withdraw up to your approved limit on an ongoing basis as long as you’re meeting minimum monthly repayments
  • Fees. Personal loans usually charge monthly service and application fees while lines of credit usually charge annual service fees. However, lenders for both personal loans as well as lines of credit may charge a variety of other hidden fees. Make sure you’re aware of all fees for any option you’re considering.

Compare personal loans and lines of credit

Rates last updated September 20th, 2018
$
Name Product Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Monthly Service Fee Application Fee Product Description Monthly Repayment
Harmoney Unsecured Personal Loan
From 6.99% (fixed)
7.69%
$5,000
3 to 5 years
$0
$500 (Upfront fee)
You'll receive a fixed rate between 6.99% p.a. and 28.21% p.a. based on your risk profile.
Apply for a loan up to $70,000 and repay your loan over 3 or 5 year terms.
SocietyOne Unsecured Personal Loan
From 7.5% (fixed)
9.51%
$5,000
2 to 5 years
$0
3% (of loan amount)
You'll receive a fixed rate between 7.5% p.a. and 19.99% p.a. based on your risk profile
A loan from $5,000 to use for a range of purposes. Benefit from no ongoing fees and no early repayment fee.
Westpac Unsecured Personal Loan
12.99% (fixed)
14.14%
$4,000
1 to 7 years
$12
$250
You'll receive a fixed rate of 12.99% p.a.
Benefit from the security of a fixed rate with the flexibility of additional repayments. Existing Westpac customers may qualify for discounts.
HSBC Personal Loan
From 9.5% (fixed)
10.06%
$5,000
1 to 5 years
$5
$150
You'll receive a fixed rate between 9.5% p.a. and 15.99% p.a. based on your risk profile
An unsecured personal loan with a tailored, fixed rate where you can make additional and early repayments without penalty.
RateSetter 3-Years Personal Loan
From 8.42% (fixed)
10.97%
$2,001
0.5 to 5 years
$0
$220
You'll receive a fixed rate from 8.42% p.a. based on your risk profile
A flexible loan with amounts from $2,001 and terms starting from 6 months. Interest and comparison rates calculated for a loan term of 5 years.
Latitude Personal Loan (Unsecured)
From 13.99% (fixed)
15.19%
$3,000
2 to 7 years
$13
$250 (Loans under $4000 - $140)
You'll receive a fixed rate between 13.99% p.a. and 29.99% p.a. based on your risk profile
Apply for what you need from $3,000 and use it for a range of purposes. Flexible repayments options.
Citi Personal Loan Plus
From 8.99% (variable)
9.96%
$5,000
3 to 5 years
$10
$199
You'll receive a variable rate between 8.99% p.a. and 17.99% p.a. based on your risk profile
A credit limit up to $75,000 that you can continue to draw down over terms up to 5 years.
Latitude Low Rate Personal Loan (Unsecured)
10.99% (fixed)
12.21%
$20,000
2 to 7 years
$13
$250
You'll receive a fixed rate of 10.99% p.a.
A secured or unsecured loan available to homeowners with a large minimum borrowing amount of . Benefit from flexible repayments and fast approval.
Sydney CU Special Offer Unsecured Personal Loan
From 7.99% (variable)
7.99%
$5,000
1 to 7 years
$0
$0
You’ll receive an introductory rate of 7.99% p.a.
An unsecured personal loan up to $30,000 and no annual or monthly fees. Introductory rate and waived application fee until 31 October 2018.
CUA Unsecured Fixed Rate Personal Loan
11.99% (fixed)
11.99%
$5,000
1 to 7 years
$0
$0
You'll receive a fixed rate of 11.99% p.a.
An unsecured loan from $5,000 with no monthly or establishment fees and flexible repayments.
NAB Personal Loan Unsecured Variable Rate
Headline rate 12.69% (variable)
13.56%
$5,000
1 to 7 years
$10
$150
You'll receive a variable rate based on your risk profile. The headline rate is 12.69% p.a.
An unsecured loan up to $55,000 you can use for a range of purposes. Benefit from fee-free additional repayments and a redraw facility.
NOW FINANCE Personal Loans
From 8.95% (fixed)
10.56%
$5,000
1.5 to 7 years
$13
$495 (Based on $10,000)
You'll receive a fixed rate between 8.95% p.a. and 16.95% p.a. based on your risk profile
Apply for loans from $5,000 and get a dedicated loan manager. No security required.
Pepper Money Unsecured Fixed Rate Personal Loan
From 9.99% (fixed)
9.99%
$5,000
1 to 7 years
$0
$0
You'll receive a fixed rate between 9.99% p.a. and 29.99% p.a. based on your risk profile
A loan from $50,000 to use for a range of purposes. Benefit from no monthly or application fees.
MyState Unsecured Personal Loan
12.99% (variable)
16.42%
$3,000
1 to 7 years
$10
$200
You'll receive a variable rate of 12.99% p.a.
Apply for up to $50,000 and make additional repayments at any time without penalty.
People's Choice CU Discounted Personal Loan
From 7.99% (fixed)
8.35%
$10,000
1 to 10 years
$0
$250
You'll receive a fixed rate of 7.99% p.a.
Secure this loan with a vehicle up to 7 years old and benefit from long loan terms up to 10 years and pre-approval.
St.George Unsecured Personal Loan - Fixed Rate
From 12.99% (fixed)
14.06%
$2,000
1 to 5 years
$12
$195
You'll receive a fixed rate between 12.99% p.a. and 19.99% p.a. based on your risk profile
A low minimum borrowing amount of $2,000 to fund a range of purposes.

Compare up to 4 providers

Rates last updated September 20th, 2018
Name Product Interest Rate (p.a.) Min Loan Amount Max. Loan Amount Application Fee Product Description
Citi Ready Credit
From 5.9% (variable)
$5,000
$75,000
$199
Introductory variable rate of 5.9% p.a. applies for 3 years.
Get an introductory rate of 5.9% p.a. on your initial balance for 3 years. Standard rate applies after this period.
Westpac Flexi Loan
From 14.99% (variable)
$4,000
$50,000
$150
You'll receive a variable rate of 14.99% p.a.
A convenient line of credit with limits from $4,000 that you can access 24/7.
St.George Get Set Loan Personal Loan
From 17% (variable)
$5,000
$50,000
$150
You'll receive a variable rate of 17% p.a.
A line of credit up to $50,000 that offers no set repayment terms. Benefit from flexibility and 24/7 access to your funds.
Bank of Melbourne Get Set Loan - Line of Credit
17% (variable)
$5,000
$50,000
$150
You'll receive a variable interest rate, currently 17% p.a.
A flexible line of credit where you only pay for the balance you owe. Large maximum credit limit of $50,000 available.

Compare up to 4 providers

Features of personal loans and lines of credit

Personal loan

Personal loans provide your funds upfront and stipulate an agreed time period to pay back your loan (called the “loan term”). Interest is charged on the entire duration of your loan term and on your entire loan amount. In general, most personal loans involve the following features:

  • Upfront lump-sum. Once the lender approves your application and you agree to the loan contract, you’ll receive all your funds upfront.
  • Interest rate. Your lender will charge either a fixed interest rate that won’t change over the term of your loan, or a variable interest rate which can rise or fall depending on market rates.
  • Term. The period over which you’ll be making repayments to fully pay back the loan is called the loan term. It generally ranges between one year and seven years.
  • Discount rates. Your lender may offer you a limited time discount if you take out a significant loan amount.
  • Flexible repayments. Depending on your lender,you may be able to choose exactly how you’ll be making monthly repayments.

Line of credit

Lines of credit have a maximum credit limit and you’ll only be charged interest on the funds you actually use. Repayments are made monthly but there is no fixed “term” for a line of credit. As long as you’re making your minimum monthly repayments, your funds will always be available to you.

  • Option to increase maximum credit limit. Your lender may provide an option to increase the maximum credit limit in line with your specific needs.
  • Flexible withdrawals. You’ll be able to withdraw funds from your line of credit whenever you like, as long as it doesn’t exceed your maximum credit/daily limit.
  • No fixed repayments. As long as you’re making a minimum required monthly payment (a percentage of withdrawn funds), there’s no fixed repayment amount.
  • Interest rate. Interest is paid monthly and is only charged on the amount you borrowed.

Which is suited to you?

Lines of credit are also helpful for those needing ongoing sources of funding to be used when they see fit. Since lines of credit are revolving, you won’t be charged on funds you don’t withdraw, making them an excellent option for backup sources of funding.

Since interest rates could get expensive for lines of credit, they are suited to those looking for flexibility with their credit and an ongoing source of funds for purchases such as paying bills, consolidating short-term debt and shopping.

Ultimately, a personal loan is suited to someone who wants structured repayments and an initial lump sum paid to them at the beginning of the loan term. A personal loan is well suited for those looking to make large purchases such as for a wedding or car using that lump sum. Also, a personal loan can be appropriate for those looking to consolidate a large amount of debt.

A personal loan may also be well-suited for those not able to pay their monthly credit card balance in full since not doing so for lines of credit could get very expensive.

Questions to ask to find the right loan for you

Although it will depend on your particular situation, you can get a clearer picture of your decision by asking yourself the following questions:

What do you need the funds for?

If you’re looking to use the funds for large purchases, then you’d probably be better off with a personal loan. If you want an ongoing source of funding, then a line of credit would be more suitable.

How flexible are you with repayments?

Whichever option you consider, make sure you’re well aware of how disciplined you’ll need to be with repayments. Some people are tempted to use a line of credit simply because it’s there. If this could be a problem for you, you may be better off with the structured features of a personal loan since they offer fixed-repayment schedules, giving you consistency and balance.

How much do you need?

Unsecured personal loans may offer about $55,000 while secured personal loans would depend on the worth of the collateral you offer up as security, but can be as much as $80,000. On the other hand, not many lenders approve small amounts for personal loans but do so for lines of credit. Very large lines of credit are also available, but you’ll need to meet strict eligibility criteria.

Picture: Shutterstock

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Personal Loan Offers

Important Information*
HSBC Personal Loan

You'll receive a fixed rate between 9.5% p.a. and 15.99% p.a. based on your risk profile
An unsecured personal loan with a tailored, fixed rate where you can make additional and early repayments without penalty.

SocietyOne Unsecured Personal Loan

You'll receive a fixed rate between 7.5% p.a. and 19.99% p.a. based on your risk profile
A loan from $5,000 to use for a range of purposes. Benefit from no ongoing fees and no early repayment fee.

Latitude Personal Loan (Unsecured)

You'll receive a fixed rate between 13.99% p.a. and 29.99% p.a. based on your risk profile
Apply for what you need from $3,000 and use it for a range of purposes. Flexible repayments options.

Citi Personal Loan Plus

You'll receive a variable rate between 8.99% p.a. and 17.99% p.a. based on your risk profile
A credit limit up to $75,000 that you can continue to draw down over terms up to 5 years.

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