The Downsides to Personal Lines of Credit

The Downsides to Personal Lines of Credit

A personal line of credit offers some great advantages, but there are several factors to consider before deciding it is the right option for you. It does not hold as a rule that one is suited to each and every person.


Besides the interest one has to pay on the amount he or she withdraws, there may be account maintenance fees (even when one does not use theirs) and charges assessed each time he or she withdraws. These terms differ with the lender, so it is best to ensure you know what you are signing up for in order to avoid surprises.

Variable Rates

The interest rate is variable so one cannot be sure what his or her monthly payments will look like. If interest rates on a line of credit drop, that is great; however, there is also the likelihood that one could see their monthly payment spike. In addition to that, the interest rate is usually higher than that of a personal loan and a home equity line of credit.

Temptation to Spend

One should know his or her spending habits before opening a line of credit account. For some people, knowing money is available as and when required can be tempting, so they might just end up using it for needless purposes.

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