Personal line of credit

Full definition

A personal line of credit (PLOC) is a flexible credit facility that gives a borrower access to funds up to an approved credit limit. Unlike a personal loan, which provides a one-time lump sum at a fixed interest rate with a defined repayment schedule, a PLOC allows repeated draws and repayments within the draw period. Interest accrues only on the outstanding drawn balance, not on the full credit limit. PLOCs are offered by banks and credit unions, often to existing customers with good credit. They are typically unsecured, with APRs ranging from about 8% to 25% based on creditworthiness. Some have a fixed draw period (e.g., 2 years) followed by a repayment period; others are open-ended and renewable annually. Comparison to alternatives: - vs. personal loan: A PLOC costs less in interest if you only need funds intermittently because you pay interest only on what is drawn. A personal loan is better for a known, one-time amount because lump-sum access is immediate and rates may be lower. - vs. credit card: A PLOC typically offers a higher limit and lower APR than a credit card, but lacks rewards and purchase protections. A PLOC is drawn via check, ACH transfer, or debit card tied to the account. - vs. HELOC: A HELOC is a secured line of credit backed by home equity. A PLOC is unsecured and typically has a lower credit limit and higher rate. PLOCs impact credit utilization, similar to credit cards, because they are revolving credit. Keeping the balance below 30% of the limit helps maintain credit scores.

• Revolving credit
• HELOC (Home Equity Line of Credit)
• Credit utilisation