A line of credit is a form of personal loan that acts like a credit card. It's a loan that allows you to conveniently draw on funds in the form of a revolving line of credit. You pay towards your balance and the accrued interest in monthly instalments, and you can access more credit (to a predetermined limit) as and when you need to.
What's the difference between a line of credit and a personal loan?
Unlike a personal loan in which the whole amount is transferred into your account, a line of credit grants you access to a credit limit, but the funds remain where they are until you decide to use them. This means you only pay interest on the funds that you use as opposed to the entire credit amount, which you would need to do with a personal loan.
This makes line of credit loans potentially useful to have in case of emergencies. However, you can use the funds for anything you choose, including consolidating your debts or making small or large purchases.
Find out more about this type of loan and if it's right for you in this guide.
Personal line of credit vs personal loan
There are a number of key differences between a line of credit and a personal loan that you should consider before choosing which one is more suitable for your needs. Generally, a line of credit can be more beneficial for someone looking for continued access to an amount of funds, whereas a personal loan may suit someone intending to make a large purchase or other singular expense.
How a line of credit varies from a personal loan
From
7.9 %
p.a.
variable rate
- Access a line of credit
- 7.9% p.a. for up to 2 years (reverts to 19.99% p.a)
100% confidential application
Citi Ready Credit
Receive a competitive introductory rate on the initial transfer balance
for 2 years, if you apply before 30 September 2019.
- Interest rate from: 7.9% p.a.
- Interest rate type: Variable
- Application fee: $199
- Minimum loan amount: $5,000
- Maximum loan amount: $75,000
Compare a range of personal line of credit loans
Updated August 24th, 2019
How does a personal line of credit loan work?
A personal line of credit works much like a credit card, giving you access to a specified credit limit to use at your discretion. The main difference between a credit card and a personal line of credit is that the credit limit is usually higher on a personal line of credit, while the rates tend to be relatively lower than credit cards. You also won't need to submit a credit application every time you need to make a withdrawal.
Once you're approved, the funds are available for you to use when you need them. You are not charged against your entire balance, only on the funds you withdraw. Some personal line of credit loans are linked to debit cards, allowing additional flexibility on how you use the funds.
How to compare your line of credit loan options
If you're considering a line of credit loan, it's important to compare your options and find the loan that's right for you. Here are some features to keep in mind when considering the products available:
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The interest rate. Not only will you want to compare different interest rates, you will also want to learn how they are calculated. Check that interest is only being applied on the funds you have withdrawn, not on your total balance. Keep in mind that in some cases, you may have the option of securing the loan against an asset, which could result in a lower interest rate.
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The fees. Compare fees carefully as they are not always set out clearly. While a personal line of credit may advertise no annual fee, there could be monthly fees or an establishment fee that will result in an increase in the overall cost of the loan. Make a running list of fees for each product you are considering and factor that into your loan amount. You can use a personal loan calculator to do this.
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Repayment terms. There are two types of personal lines of credit. There are term-plan line of credit loans in which you have a certain time frame (usually one to five years) to pay off the amount you borrowed. The other type of line of credit loan will allow you to keep the loan open so long as you continue to make regular monthly repayments. This is known as revolving credit and might be appropriate for those who want a funding source available as a safety net for unexpected expenses.
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How accessible your funds are. Another thing to consider with this type of loan is how you will access your funds. Again, read the terms carefully. While a bank may offer a card that you can use at ATMs, there could be charges applied for this convenience. You are going to want to weigh the methods of accessing the funds along with any fees associated with them.
Things to consider
Benefits
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You're (usually) only charged for what you use. In most cases you will only be charged interest on the funds you have borrowed, not the total loan amount.
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You can have easy access to your funds. If your account is linked to a card, you are able to draw the funds you need through ATMs and online banking.
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There are flexible terms. You can use the funds how and when you want.
Drawbacks
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Fees and charges. Be mindful that fees and charges will likely apply, such as an annual fee, establishment fee or a monthly service fee.
What are the risks?
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Overspending. For some individuals, access to a large amount of credit may cause them to make unnecessary or otherwise unaffordable purchases.
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Penalties. While the repayments on a line of credit loan are generally flexible, you should make sure that you read the terms carefully. Most will expect at least monthly repayments and may charge penalties if that requirement is not satisfied.
How you can apply
You can use the table found on this page to begin comparing your personal line of credit loan options. The eligibility criteria will differ between lenders, so make sure to check this carefully before submitting your application. However, you will generally be asked to provide the following information:
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Income. You will have to show proof of an ongoing steady income. Your payslips are usually acceptable or a bank statement that shows consistent deposits from an employer.
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Liabilities. You will need to provide a complete list of your current debts.
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Identification. All lenders will need 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.
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Assets. Information regarding your home if you are a homeowner, plus any vehicles you own and any savings and investment accounts in your name.
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Matt Corke is the head of publishing in Australia for Finder. He previously worked as the publisher for credit cards, home loans, personal loans and credit scores. Matt built his first website in 1999 and has been building computers since he was in his early teens. In that time he has survived the dot-com crash and countless Google algorithm updates.
You'll receive a variable rate between 8.99% p.a. and 17.99% p.a. (9.67% p.a. to 18.6% p.a. comparison rate) 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. Note: The establishment fee will be waived if you apply before 30 September 2019.
You'll receive a fixed rate of 8.99% p.a.
Benefit from no ongoing fees, no early repayment fees and flexible loan terms on amounts up to $30,000.
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.
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. Note: Establishment fee will be waived if you apply and are approved before 30 September 2019.
hi what are the minimum employment requirements for a personal loan or a line of credit
Hi Preston,
Thanks for leaving a question on finder.
The eligibility criteria differ between lenders, so make sure to check this carefully before submitting your application. Be prepared with the following information as most lenders will have similar criteria necessary as part of the application:
1. Income. You will have to show proof of an ongoing steady income. Your payslips are usually acceptable or a bank statement which shows consistent deposits from an employer.
2. Liabilities. You are going to be asked to provide a complete list of your currents debts.
3. Identification. All lenders will need to see a current and valid photo ID of the applicant and in most cases you will be asked to provide a photocopy for their records.
4. Assets. Any real property you own, plus cars, savings and investment accounts.
It is not stated on how long you should be employed to get approved for a loan and you will have to check with the lender regarding this. Typically, as long as you can prove that you have steady income and currently employed, you will be approved.
Cheers,
Joel
hi I have $7000 in credit card debt how can i pay it off fast.
Hi Marlene,
Thanks for reaching out.
To give you some tips on how you can possible reduce or clear your personal debt, here is a page you can refer to. Should you want to move forward with a specific tip, a link is provided on the same page.
Cheers,
Joanne
Hello i would like to borrow 10,000- 15,000 i have 1 unpaid default a payday loan with a couple of enquiries recently i am employed full time and would like to get a private used car pay any bills or debts in full with some spare to get some essential furniture so its a single payment to help so i can work on my score before I buy a house
Hi Tristen,
Thanks for reaching out.
Typically, with bad credit personal loan, the possible loan amount may not be as much as $15,000, although, there are lenders who may offer $10,000, depending on if you meet the criteria. Although we’re not sure if you’ll be approved for a personal loan or not, you may review the criteria and contact a lender featured on this page to discuss your options and eligibility.
Cheers,
May
I would like to know if people with a bad credit rating can be considered.
Hi Nic,
Unfortunately you need good credit to be eligible for Citibank’s line of credit. You can compare your short term loan options on this page, or if you;re looking for a bad credit line of credit product, Wallet Wizard and MyKredit are two options to consider.
Hope this helps,
Elizabeth
Hi
Does the Commonwealth bank provide a personal line of credit account?
Hi M.Smith,
CommBank provides a Viridian line of credit that is linked to your home loan account. You can also consider a personal overdraft that is linked to your CommBank account.
I hope this helps,
Elizabeth
Eligibility please
Hi Tina,
Thanks for your question.
The eligibility criteria vary from bank to bank. But generally, these banks would approve your application based on their assessment of your income, debts, assets, credit history and provided necessary documents/information.
Cheers,
May