{"id":10608,"date":"2024-02-06T13:18:18","date_gmt":"2024-02-06T19:18:18","guid":{"rendered":"https:\/\/www.lexingtonlaw.com\/blog\/?p=10608"},"modified":"2025-06-06T10:02:36","modified_gmt":"2025-06-06T16:02:36","slug":"personal-line-of-credit","status":"publish","type":"post","link":"https:\/\/www.lexingtonlaw.com\/blog\/loans\/personal-line-of-credit.html","title":{"rendered":"What is a personal line of credit?"},"content":{"rendered":"\n
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A personal line of credit (PLOC) is a form of revolving credit that allows you to access funds and pay the loan back with interest. Some PLOCs offer better interest rates than credit cards.<\/p>\n\n\n\n

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. <\/em>See Lexington Law\u2019s editorial disclosure for more information.<\/em><\/a><\/p>\n\n\n\n

Lines of credit are a major contributing factor to the average consumer debt<\/a> in the United States, but personal lines of credit may provide funds when you need them the most. When you have a personal line of credit, you may also have some peace of mind because it can provide you with funds in an emergency or when you\u2019re low on cash.<\/p>\n\n\n\n

Here you will learn about what personal lines of credit are, their pros and cons and how they compare to other lines of credit. By the time you finish reading, you\u2019ll have a better idea of whether or not a personal line of credit is right for you and your situation.<\/p>\n\n\n\n

What is a personal line of credit (PLOC)?<\/h2>\n\n\n\n

A personal line of credit (PLOC) is a type of flexible loan you can use whenever you need it, paying back the interest and principal only when you use the credit\u2014similar to how a credit card functions. This is different from an installment loan<\/a>, where you repay the amount borrowed in full with interest over a fixed term.<\/p>\n\n\n\n

A personal line of credit is revolving debt<\/a>. This means it\u2019s available to you all the time, with a predefined maximum, and it\u2019s often used by individuals to cover an income gap.<\/p>\n\n\n\n

A personal line of credit shouldn\u2019t be confused with a home equity line of credit<\/a> or a business line of credit. A home equity line of credit allows you to borrow credit against your home. A business line of credit is similar to a personal line of credit but should only be used for business expenses.<\/p>\n\n\n\n

How does a personal line of credit work?<\/h2>\n\n\n\n

Personal lines of credit work like credit cards, but you don\u2019t use a card. Similar to credit cards, you will need to apply through a financial institution, and they\u2019ll run a credit check on your credit report<\/a>. If you\u2019re approved, the financial institution will give you a credit limit, and you can access the funds as needed.<\/p>\n\n\n\n

Although you won\u2019t have a credit card, you can access the funds by going directly to a bank branch or using their website. You may also be able to move funds to your bank account via an app. You\u2019ll eventually make payments on the borrowed funds with interest.<\/p>\n\n\n\n

Unlike credit cards, personal lines of credit expire. When you\u2019re approved, the bank will let you know how long the line of credit is good. According to Forbes, the typical term for personal lines of credit<\/a> is two to seven years.<\/p>\n\n\n\n

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Personal line of credit vs. personal loan<\/h2>\n\n\n\n

A personal loan is a lump-sum loan that you\u2019re responsible for paying back in its entirety plus interest. Unlike with a PLOC, you are responsible for the entire amount you\u2019re approved for, even if you don\u2019t use it all. However, loans usually have lower interest rates because they\u2019re less risky for lenders.<\/p>\n\n\n\n

Personal lines of credit are often a preventative measure, whereas personal loans<\/a> are typically for making a large purchase. Using a personal line of credit to make a large purchase may not be a good idea because they have higher interest rates, and you may need to pay the funds back sooner.<\/p>\n\n\n\n

How to get a personal line of credit<\/h2>\n\n\n\n

The process for getting your personal line of credit can differ depending on your credit standing. Below are three steps explaining how to get a personal line of credit:<\/p>\n\n\n\n