Jun 03, 2025
A personal line of credit differs from a personal loan in the way you access the funds and how you repay them. A personal line of credit lets you borrow up to a set amount, repay what you’ve used, and borrow again as needed for as long as the line remains open. A personal loan provides a lump sum that is paid back in fixed installments over time.
Knowing the difference may help you save money. Keep reading to find out which one is right for you.
A personal line of credit provides an amount of money that a lender allows you to borrow and repay repeatedly over time. It's similar to a credit card because they are both types of revolving credit. They may differ in the level of credit limits, fees, and interest rates. A personal line of credit may offer higher limits and lower rates than a credit card, making it well suited for larger expenses.
When you receive a line of credit, the money isn't deposited into your account directly. Instead, you may access the funds on an ongoing basis through a card or other means. You can generally choose the repayment term or the duration of time you’ll take to repay the loan plus interest. Minimum monthly repayments are typically required.
Lines of credit may be either secured or unsecured. A secured line of credit requires that you pledge collateral, such as a house or car, to guarantee repayment. An unsecured personal line of credit requires no collateral.
A personal loan is an amount of money paid to you as a lump sum. It's an unsecured loan that is a type of closed-end credit.
Unlike a line of credit, you typically repay a personal loan with a fixed monthly amount over a set number of months. At Discover® Personal Loans, for example, you can choose how long you’d like to repay your loan—from 36 up to 84 months, depending on what works with your budget.
A personal loan may be used for almost any purpose. Here are some examples.
The interest rate you are charged when borrowing money from either a line of credit or a personal loan is typically determined by several factors. These may include your credit score, credit history, application information, and the repayment term you select.
A line of credit may have a variable interest rate, meaning the interest rate and payment amount might change from month to month. Most personal loans charge a fixed interest rate. This allows you to plan and budget knowing the amount of your monthly payments.
With a line of credit you may spend up to the maximum amount you are allowed to borrow at any time. The money you borrow does not go directly into your bank account. It is usually available from a separate account linked to the line of credit.
With a personal loan you receive your funds in one lump sum. If you have a Discover personal loan, for example, the money can be sent directly to many creditors or to your bank account. Funds can be sent as soon as the next business day after your acceptance.
With a line of credit there may be additional costs, such as origination or transaction fees. You should review any rates and fees associated with a line of credit. Certain additional costs might change the amount you repay from month to month.
Some personal loans also have fees. You should check the specific terms for fees and costs that may come with any personal loan you consider. You may find that you can save money by looking for a lender like Discover Personal Loans that charges no fees of any kind.
If you’re interested in finding out more, with Discover, you can see what your loan rate and set regular payment could be before you apply with no impact to your credit.
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