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Personal loan vs line of credit

Find out if a line of credit or personal loan is right for you and compare them now.

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We’re committed to our readers and editorial independence. We don’t compare all products in the market and may receive compensation when we refer you to our partners, but this does not influence our opinions or reviews. Learn more about Finder.

Both a personal loan and line of credit give you access to finance when you need it, but both have their benefits and drawbacks.

Learn how they differ and see your finance options below.

Compare personal loans and lines of credit

Data indicated here is updated regularly
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Name Product Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Application Fee Monthly Service Fee Monthly Repayment
Harmoney Unsecured Personal Loan

From 6.99% (fixed)
7.79%
$2,000
3 to 5 years
$575 ($275 for loans of below $5,000)
$0
You'll receive a fixed rate between 6.99% p.a. and 25.69% p.a. based on your risk profile.
Apply for a loan up to $50,000 and repay your loan over 3 or 5 year terms.
Plenti Fixed Rate Personal Loan

From 6.49% (fixed)
6.84%
$2,001
3 to 5 years
From $149 to $599
$0
You'll receive a fixed rate between 6.49% p.a. and 11.99% p.a. based on your risk profile
A flexible loan with amounts from $2,001 and terms starting from 3 years. Interest and comparison rates calculated for a loan term of 5 years.
OurMoneyMarket Personal Loan

From 6.75% (fixed)
6.96%
$2,001
1 to 7 years
1.5–6% of your total loan amount
$0
You'll receive a fixed rate from 6.75% p.a. to 20.99% p.a. based on your risk profile
A personalised loan from $2,001 to $75,000 that varies based on your credit history and financial situation.
Alex Personal Loan

From 6.95% (fixed)
6.95%
$2,100
6 months to 5 years
$0 (waived $295)
$0
You'll receive a fixed interest rate from 6.95% p.a. to 19.99% p.a. based on your risk profile
Borrow between $2,100 and $30,000 from 6 months to 5 years. Benefit from no ongoing fees. Note: The establishment fee of $295 is waived for all applications until 30 November 2020. Terms & conditions apply.
SocietyOne Unsecured Personal Loan (5 years)

From 7.99% (fixed)
7.99%
$5,000
5 years
from 0% to 5% (capped at $995)
$0
You'll receive a fixed rate between 7.99% p.a. and 20.49% 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.
SocietyOne Unsecured Personal Loan (2-3 years)

From 6.99% (fixed)
6.99%
$5,000
2 to 3 years
from 0% to 5% (capped at $995)
$0
You'll receive a fixed rate between 6.99% p.a. and 17.99% 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.
Plenti Variable Rate Personal Loan

From 5.79% (variable)
6.78%
$2,001
1 to 3 years
From $149 to $599
$0
You'll receive a variable rate from 5.79% p.a and 11.99% p.a. based on your risk profile
A flexible loan with amounts from $2,001 and terms starting from 12 months. Benefit from transparent costs and a rate estimate before you apply.
NAB Personal Loan Unsecured Fixed

From 9.99% (fixed)
10.88%
$5,000
1 to 7 years
$150
$10
You'll receive a fixed rate between 9.99% p.a. and 18.99% p.a. ( 10.88% p.a. to 19.83% p.a. comparison rate) based on your risk profile
An unsecured loan up to $55,000 you can use for a range of purposes and pay off over up to 7 years. Note: Majority of customers will get the headline rate of 12.69% p.a. (13.56% p.a. comparison rate) or less. See Comparison rate warning in (i) above.
Pepper Money No Fee Personal Loan

From 6.95% (fixed)
6.95%
$5,000
18 months to 7 years
$0
$0
You'll receive a fixed rate between 6.95% p.a. and 17.95% p.a. based on your risk profile
Borrow from $5,000 to $15,000 and use for a range of purposes. Pay no upfront, early repayment or ongoing fees.
Symple Loans Personal Loan

From 5.75% (variable)
6.47%
$5,000
1 to 7 years
from 0% to 5% of the loan amount
$10
You'll receive a personalised interest rate from 5.75% p.a. to 21.99% p.a. based on your risk profile
Borrow up to $50,000 to pay for what you need.
Wisr Personal Loan

From 7.95% (fixed)
8.78%
$5,000
3 to 5 years
$595 (Establishment Fee)
$0
You'll receive a fixed rate between 7.95% p.a. and 19.45% p.a. based on your risk profile
A loan from $5,000 that charges no fees for extra or early repayments. Keep in mind security is required in some cases.
Heritage Bank Fixed Personal Loan
7.99% (fixed)
8.62%
$5,000
1 to 5 years
$200
$5
Choose a fixed rate loan and receive a comparison rate of 8.62% p.a.
Fixed rate loans are available up to $100,000 on terms from 1 to 5 years.
CUA Unsecured Fixed Rate Personal Loan
9.89% (fixed)
10.14%
$5,000
1 to 7 years
$175
$0
You'll receive a fixed rate of 9.89% p.a.
An unsecured loan from $5,000 with flexible repayments and no monthly fee.
NAB Personal Loan Unsecured Variable Rate

From 9.99% (variable)
10.88%
$5,000
1 to 7 years
$150
$10
You'll receive a variable rate between 9.99% p.a. and 18.99% p.a. ( 10.88% p.a. to 19.83% p.a. comparison rate) based on your risk profile
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. Note: Majority of customers will get the headline rate of 12.69% p.a. (13.56% p.a. comparison rate) or less. See Comparison rate warning in (i) above.
CUA Unsecured Variable Personal Loan
11.89% (variable)
12.15%
$5,000
1 to 7 years
$175
$0
You'll receive a variable rate of 11.89% p.a.
Borrow from $5,000 with the option for flexible repayments and no monthly fees.
MoneyMe Personal Loans

From 8.99% (fixed)
10.68%
$3,001
2 to 5 years
5 - 8% of the principal borrowed, capped at $1,200
$0
You'll receive an interest rate between 8.99% p.a. and 29.99% p.a. based on your risk profile
A flexible personal loan from MoneyMe with access to cash when you need it.
Heritage Bank Standard Variable Personal Loan
11.99% (variable)
12.61%
$5,000
1 to 10 years
$200
$5
Choose a variable rate loan and receive a 12.61% p.a. comparison rate
Variable rate loans are available from $5,000 - $100,000 on terms of 1 to 10 years.
Latitude Personal Loan (Unsecured)

From 7.99% (fixed)
9.24%
$3,000
1 to 7 years
$250 (Loans under $5000 - $140)
$13
You'll receive a fixed rate between 7.99% p.a. and 19.99% p.a. based on your risk profile
Apply for what you need from $3,000 and use it for a range of purposes. Repay weekly, fortnightly or monthly.
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Compare up to 4 providers

Data indicated here is updated regularly
Name Product Interest rate (p.a.) Min Loan Amount Max. Loan Amount Application Fee
Citi Ready Credit
20.49%
(variable)
$5,000
$75,000
$199
Introductory fixed rate of 5.90% p.a. applies for 1 year
Get an introductory rate of 5.90% p.a. on your initial balances transferred for 1 year. Standard rate applies after this period. Note: This offer ends on 18 December 2020. Terms & conditions apply.
Credit24 Line of Credit
48%
(variable)
$500
$10,000
$0
You’ll receive a standard variable interest rate of 48% p.a.
Lines of credit loans are available from $500 - $10,000 on terms of up to 3 years.
Citi Ready Credit (3 Years Balance Transfer)
5.90%
(fixed)
$5,000
$75,000
$199
Borrow between $5,000 and $75,000
Pay no fees and no asset security required. Note: This rate applies to the first 3 years and this promotion ends on 31 January 2021.
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Compare up to 4 providers

The main points of difference

  • Loan term. Personal loans have a fixed term of anywhere between one and seven years, and need to be paid back in full by the end of that term. 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 up-front as soon as you agree on the loan contract and sign it. With a line 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.

Features of personal loans and lines of credit

Personal loan

Personal loans provide your funds up-front 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:

  • Up-front lump-sum. Once the lender approves your application and you agree to the loan contract, you’ll receive all your funds up-front.
  • 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 have used.

Which is suited to you?

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. A personal loan can also be appropriate for those looking to consolidate a large amount of debt.

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

Lines of credit are 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 use, making them an excellent option as a backup source 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.

Questions to ask to find the right loan for you

While 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, 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

More guides on Finder

Personal Loan Offers

Important Information*
Logo for Harmoney Unsecured Personal Loan
Harmoney Unsecured Personal Loan

You'll receive a fixed rate between 6.99% p.a. and 25.69% p.a. based on your risk profile.
Apply for a loan up to $50,000 and repay your loan over 3 or 5 years terms.

Logo for NAB Personal Loan Unsecured Fixed
NAB Personal Loan Unsecured Fixed

You'll receive a fixed rate between 9.99% p.a. and 18.99% p.a. ( 10.88% p.a. to 19.83% p.a. comparison rate) based on your risk profile
An unsecured loan up to $55,000 you can use for a range of purposes and pay off over up to 7 years. Note: Majority of customers will get the headline rate of 12.69% p.a. (13.56% p.a. comparison rate) or less. See Comparison rate warning in (i) above.

Logo for SocietyOne Unsecured Personal Loan
SocietyOne Unsecured Personal Loan

You'll receive a fixed rate between 6.99% p.a. and 20.49% 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.

Logo for Pepper Money Unsecured Fixed Rate Personal Loan
Pepper Money Unsecured Fixed Rate Personal Loan

You'll receive a fixed rate between 6.95% p.a. and 17.95% p.a. based on your risk profile
A loan from $5,000 to use for a range of purposes. Make additional repayments or pay off the loan early, penalty-free.

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