line of credit

Personal Loan Vs. Line of Credit: Which is Better?

November 02, 2022 • 2784 views

In life, we often come across situations where we might find ourselves short of cash when it is needed the most. As a result, we must look for some form of financial assistance, usually a loan to fulfil our specific requirements. However, in a market flooded with a host of different financial products, it often seems difficult to figure out exactly which option to go for that could best suit our needs. Be it a Personal Loan or Line of Credit, what you decide to choose is crucial as it further affects future financial decisions.

When it comes to finances, it is important to research well and find as much information as possible about different financial products to make an informed decision. In this blog, we will learn about Personal Loans, lines of credit, and more.

A Personal Loan is a financial product that allows borrowers to receive instant funds with no restriction on end usage. It is an unsecured loan, which means you do not have to pledge any assets as security or collateral against the loan amount.

While the features of a Personal Loan can vary between different lenders, some common attributes of this loan typically include

No Collateral/Security Involved

As previously stated, a personal loan is unsecured, which means that there is no security or collateral involved. You can simply avail of this loan if you fulfil the eligibility criteria and submit the required documents.

Flexible Loan Tenure

Most lending institutions like Poonawalla Fincorp offer Personal Loans with a repayment tenure of up to 60 months. This gives borrowers enough time to pay back the loan amount in a stress-free manner.

Less Paperwork & Documentation

With loan processing becoming increasingly automated and streamlined these days, borrowers can easily apply for a Personal Loan with basic documents that are required by lenders to complete KYC and background verification for further processing.

High Loan Amount

You can avail of a Personal Loan from lenders like Poonawalla Fincorp with a high loan amount of up to Rs.30 Lakh, allowing you to fulfil any goal or requirement without worrying about a shortage of funds.

No Restrictions on End-Purpose or Usage

Personal Loans can be used to fulfil any purpose, with no end-use restrictions. Whether it is for covering medical bills, hosting a wedding, overseas education, or for travel expenses, a Personal Loan can become the answer to most financial challenges in your life.

Swift Loan Approval & Disbursal

Nowadays, applying for a loan is simpler. If you are seeking a Personal loan, apply online – it really is that easy. All you must do is check if you are eligible for a Personal Loan, submit the basic documents required for the loan application, and you’re set to go. Once your application is approved and your background verification is done, you can receive your loan amount in no time.

Also Read: How to Avail Personal Loans at Lowest Interest Rate?

What is a Line of Credit? Definition, Types, and Examples

A line of credit (LOC), as the name suggests, is a revolving credit that comes with a pre-set limit. You can borrow funds as and when required until you reach the credit limit. You can continue to borrow funds when you need them with an open line of credit, meaning if you are regular with your previous repayments, the line of credit stays open.

Some of the Most Common Features of A Line of Credit Include

Both Secured & Unsecured

A line of credit can be both secured and unsecured depending on the type of LOC that you wish to avail of to fulfil your needs. While LOCs generally are unsecured, some LOCs like the Home Equity Line of Credit (HELOC) involve putting up the equity in your home as collateral.


The most essential feature of a line of credit is that it offers flexibility by allowing you to borrow funds when required to fulfil certain needs, instead of having to borrow a lump sum amount at once.

Interest on the Amount Borrowed

When availing of funds from a line of credit, borrowers can simply pay interest on the amount borrowed instead of the entire credit line.

Adjustment on Repayment

You can also adjust the repayment amount on the borrowed funds as per your needs. It can be determined according to your budget or cash flow at the time of repayment.

No Pre-Defined Purchase Intent is Required

A line of credit does not require a pre-determined purchase or usage. You can borrow funds as per your present financial requirements.

Repayment As Per Usage

Unlike most loans where you need to pay them off over a specified period via EMIs, the repayment tenure of lines of credit tends to be according to the funds you borrow.

Personal Loans and Lines of Credit – Key Differences

Now that we know more about Personal Loans and lines of credit and their respective features, let’s chalk out the key differences between these two financing options.

Repayment Tenure

While both Personal Loans and lines of credit offer flexibility in terms of repayment, the tenure for both differs. While the tenure for a Personal Loan is pre-determined according to the loan agreement, the LOC tenure depends on the usage of funds and not the entire credit line.

Interest Rate

The interest rate for Personal Loans is fixed and pre-defined. On the other hand, LOCs come with variable interest rates as applicable on the amount borrowed.


Anyone who applies for a Personal Loan can receive a lump sum to fulfil any of their specific needs. With a line of credit, the end purpose is not fixed for the borrower. They can continue to borrow funds from the line of credit up to its maximum limit to fulfil any purpose.

Also Read: How To Get A 1 Lakh Personal Loan in India?

Bottom Line: Personal Loan Vs. Line of Credit - Which is Better?

While both Personal Loans and lines of credit allow you to borrow funds to fulfil your financial needs, their functions are different. To determine which option best suits you and your requirements, it is recommended that you consider how you plan to utilize the funds, your spending habits, and your overall financial health. Most important, do keep a check on your credit score that can further help you and your lender ascertain the right financial product for you.


We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Personal Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply

poonawalla fincorp team

Poonawalla Fincorp Team

Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.

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