Although personal loans and credit lines can be very similar, they have a few important differences you will need to take into account before choosing one or the other. These differences can often decide whether the loan will take its toll on your finances, or help you breathe more easily as you repay the money you’ve used in the long run.
The Most Important Differences to Consider
Most personal loans are very different from a credit line, and will present you with varying pros and cons, depending on what you’re really looking for. Find more information here – gemoney.co.nz. While the amount you borrow may be the same, other variables can make it harder for you to cope with one offer or the other, so it’s important to know about these differences in advance:
• Probably the most important difference between a personal loan and a credit line is the interest rate. In the case of most loans it is fixed, while credit lines come with variable interest rates that can go up and down quite a lot, preventing you from planning your repayments too accurately.
• Credit lines offer more flexibility, in some cases allowing for a long draw period and a generous repayment period. A personal loan will normally have fixed repayment periods for you to choose from, but is far more predictable.
• In most cases, credit lines are handled through either online transfers or by check, while personal loans are provided through a single lump sum disbursement.
What Are the Similarities?
There are actually more similarities between a loan and a credit line than most people would imagine. First of all, the amount you can borrow through both credit lines and loan offers provided by the same lender are generally the same (usually somewhere between $3,000 and $25,000, but it differs quite greatly between lenders).
Also, neither a personal loan nor a credit line requires collateral, and they can both be repaid through monthly payments. Other costs, fees and policies, such as those regarding closing costs and late fees are also similar, so you won’t need to look into those details too much.
Whether you should get a personal loan or credit line mainly depends on your financial situation, spending habits and general lifestyle. If you don’t mind the variable nature of credit lines and the fact that they may or may not come at a higher interest, then you might be able to benefit from them.
Otherwise, for the sake of stability and obtaining a predictable outcome that will not hurt your credit score or finances, it is often best to consider fixed interest personal loans that have repayment plans you will always be able to predict and plan for in accordance with your monthly income and budget.