Line of Credit Personal Loan

Name: Line of Credit Personal Loan
Creator: Savvy
Published: 2021-01-08T16:20:39+10:30

Home > Personal Loans > Line of Credit Personal Loan

It won't affect your credit score.

Written by , updated on October 4th, 2023

What is a line of credit personal loan?

A line of credit personal loan is a type of personal finance product that is closer in structure to a credit card. With this type of loan, you’re approved for a set limit and are able to withdraw funds at your leisure up to this amount at any given time. What makes these loans appealing to borrowers is that you aren’t forced into taking on the entire loan amount all at once and begin repaying it immediately; you can take from and repay your loan whenever you like, only paying interest on what you withdraw.

Like any other personal loan, a line of credit can be used for anything you’d like: conduct ongoing improvements around your home, pay for recurring medical expenses or simply to give you a helping hand with household bills. The borrowing power you’ll enjoy on this type of loan is also the same, with amounts ranging up to as much as $50,000. However, not all lenders will offer the same borrowing terms, so you should always compare offers to ensure that you’ll be able to access the amount you’re looking for.

It’s important to note that these loans can sometimes work out to be an expensive way of accessing personal finance, though. This is because credit line interest rates can, in some cases, be even higher than those of credit cards, which are in themselves higher than other loans like personal and car finance. Fees are also different, as credit lines come with extra costs that are difficult to avoid such as ongoing monthly fees and discharge or closing costs.

At Savvy, we help you compare some of the top personal loans from a range of flexible lenders across the country. These loans offer just as much freedom and flexibility, so it’s important to consider them when you’re making your mind up over which product to choose.

Types of personal loan

Unsecured personal loans

With an unsecured personal loan, you can potentially borrow as much as $75,000 without the need to attach any valuable assets, such as your car, as security. These loans are the most widely available and often the quickest, with same-day approval possible.

Secured personal loans

Secured personal loans, on the other hand, make use of collateral. This lowers your risk profile in the eyes of a lender, potentially lowering your interest rate and expanding your borrowing power beyond what you may be able to get through an unsecured loan.

Variable rate personal loans

Variable interest rates remain open to fluctuation during your term. This means you can benefit from decreasing rates and save on your loan if the market heads in that direction, although you’ll also pay more if rates start rising.

Fixed rate personal loans

Fixed interest rates are locked at the beginning of your loan and remain constant throughout your repayments. This acts as a valuable protection against interest rate increases, as your loan will be unaffected, but you’ll miss out on potential drops as well.

Debt consolidation loans

If you’re paying off multiple debts at the moment, particularly those with high interest (such as credit card debts), consolidating them into one payment can not only make them more convenient to manage but also potentially save you money overall.

Travel loans

Looking to take off on a holiday with your family but want to pay it off at your own speed? Travelling can be expensive, so you can distribute the cost of your next trip over a period you’re more comfortable with by taking out a personal loan to pay for it.

Wedding loans

There are so many costs that go into making your dream wedding a reality, from venue hire to catering to dresses and suits and so much more. By taking out a personal loan, you can start planning the big day you want, even if you can’t pay for it upfront.

Renovation loans

Home improvements are desirable for a range of homeowners to help keep their living space fresh and interesting, not to mention increase its value. You can get past the financial hit of renovations with a personal loan paid in instalments.

Self-employed loans

Personal loans aren’t limited to PAYG employees, though. If you’re running your own business, you can still be approved for financing by submitting tax returns and other alternative documents instead of payslips and utilise your funds however you wish.

Student & education loans

There’s a variety of expenses which come with being a student, ranging from the cost of your courses, textbooks and computer to your accommodation. Taking out a personal loan can make these costs more manageable by spacing them out.

Green loans

Some lenders offer green personal loans, which are designed to be used for energy-efficient appliances and products such as solar panel and air conditioning installation in your home. You can qualify for lower interest rates and fees with this loan.

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How do lines of credit compare to standard personal loans?

Repayment term

Instalments

Flexibility

Interest rate

Lender options

Frequently asked line of credit personal loan questions

What’s the difference between a line of credit and an overdraft?

An overdraft works like a line of credit, except it’s applied for, and attached to, your bank account to enable you to withdraw beyond $0. Overdrafts are generally available for lower maximum amounts than what you might be able to access through a line of credit, but interest rates can be lower. They otherwise serve the same purpose, so you should compare which is better suited to your needs.

Will I be required to pay fees on my loan if I don’t use it?

Yes – you’ll still be charged monthly account-keeping fees regardless of whether you withdraw from your available funds in a given month. This means that if your account lays dormant for several months, even though you won’t be paying interest, you’re likely to rack up fees across that time.

Can I be approved for a line of credit loan online with bad credit?

You can be – however, the lenders who are able to accept line of credit applications from bad credit customers are even fewer. Also, because of your credit score, you’re likely to receive a much higher interest rate on your account, which can cost you a lot of money if you aren’t able to keep on top of the funds in your account.

Are personal lines of credit secured in Australia?

Not always – the majority of personal lines of credit in Australia are unsecured, which means you won’t need to worry about putting up an asset of yours as collateral for the loan. While this increases the score, it puts paid to any perceived risk of losing your car or another chosen asset and grants you more flexibility in the way you can utilise your funds.

How soon can I be approved?

Lines of credit are able to be approved just as quickly as any other personal loan: you can receive an instant outcome within as few as 60 seconds after submitting your application and have your account fully opened and accessible within one day. Because of this, you can get up and running and spend your funds however you wish in no time at all.

Should I take out a line of credit for my business?

A business line of credit is one of several financing options available to business owners. They’re particularly popular with businesses because of the fact that they’re easily accessible and can be kept open for an extended period without needing to reapply repeatedly or make constant repayments towards a lump sum. These are often secured, but can still be obtained without any collateral, which means that they’re available for vast amounts more than personal finance.

Is it better to use a credit card instead?

Depending on how you use them, a credit card could be the better option. If you’re only looking to spend around $2,000 to $3,000 at any given time, it’s plausible that you’ll be able to fully pay off your credit card each month and avoid incurring any interest. This is because they come with interest-free periods that you can take advantage of. However, it’s important not to let your debts pile up in either finance type, as steep interest can set you back.