Personal Loans vs. Personal Lines of Credit: What’s the Difference?

When you need extra cash, whether to consolidate debt, cover unexpected expenses, or fund a major purchase, you’ll likely hear two terms thrown around: préstamos personales, y personal lines of credit. 

At first glance, they might seem similar, but they work very differently. In this personal loans vs. personal lines of credit guide, we will help you choose the right fit for your financial goals. Let’s break it down.

Personal Loans vs. Personal Lines of Credit: What’s the Difference?

What is a Personal Loan?

Un préstamo personal is a lump sum of money you borrow from a bank, credit union, or online lender. You receive the entire amount upfront and repay it over a fixed period, usually with set monthly payments and a fixed interest rate.

Key features:

• One-time funding: You get the full loan amount immediately.
• Fixed payments: Your monthly payment stays the same until the loan is paid off.
• Predictable costs: Because rates and terms are fixed, you’ll know exactly what you owe.

When it’s useful:
Perfect for covering large, planned expenses like home renovations, medical bills, or debt consolidation, where you know exactly how much you need.

What is a Personal Line of Credit?

Un personal line of credit (often called a PLOC) works more like a credit card. Instead of a lump sum, you get access to a set credit limit and can borrow as much as you need, when you need it, up to that limit.

Key features:

• Revolving credit: Borrow, repay, and borrow again without reapplying.
• Flexible access: Withdraw funds only when necessary.
• Variable payments: What you owe changes based on your balance and interest rate.

When it’s useful:

Best for ongoing or unpredictable expenses, like covering seasonal business costs, home repairs over time, or as an emergency safety net.

How Interest Works: Fixed vs. Variable

Most personal loans come with a fixed interest rate, locking in your monthly payment and total cost.
Personal lines of credit usually have a variable rate, so your payments can change based on the market.

If stability is your top priority, a personal loan might be better. But if you want flexibility, a line of credit could make more sense, just remember rates can rise.

Repayment: Set Schedule vs. Flexible Draws

With personal loans, repayment is straightforward: equal monthly payments until the loan is paid off.

Lines of credit are more flexible: you only pay interest on what you borrow, and minimum payments can be lower. But because the balance can rise and fall, it takes discipline to avoid carrying high debt long-term.

Which Option Fits You?

Feature	Personal Loan	Personal Line of Credit
Best for	Large, one-time expenses	Ongoing or unpredictable expenses
Payment type	Fixed monthly payment	Variable payments
Tasa de interés	Usually fixed	Usually variable
Flexibility	Lower	Higher
Access to funds	Lump sum	Borrow as needed, repay & reuse

Conclusión

Both personal loans and personal lines of credit help cover life’s expenses, but they serve different needs.

• Choose a préstamo personal if you know the exact amount you need and want predictable payments.
• Choose a line of credit if you want ongoing access to funds and flexibility.

Understanding the difference isn’t just about borrowing, it’s about borrowing smartly.If you’d like help exploring your best option or have questions about rates and terms, our team at Cash in Minutes is here to help.