Differences and Similarities between Personal Loans and Personal Line of Credit
Differences and Similarities between Personal Loans and Personal Line of Credit
On the other hand, if you want to make a purchase or manage your expenses but you are not clear about the exact sum of money you need, personal lines of credit are the best solution. These have a credit limit and may have variable interest rates.
The Difference
Comparing the two funding sources based on the annual percentage rate, the lines of credit carry higher interest rates. In the case of personal business loans, the best APRs lie between 6% and 9% based on your credit
The higher rate of interest in personal lines of credit is due to the higher risk factor involved for the lender. Due to the high risk, the unsecured personal line of credit is difficult to qualify. Note that the application process is easier.
Similarities
Both personal lines of credit and Personal loans have many similarities.
Both of them require you to pay a fixed interest. Besides, they are useful to pay the annual expenses without the need for annual fees. They both involve a credit evaluation process in order to determine eligibility.
