A personal line of credit is a revolving credit account with a fixed maximum amount that you can borrow. It's comparable to a standard credit card in the sense that it allows you to borrow money as needed, rather than requiring you to take up all the cash at once, much like a bank does. Personal lines of credit are suitable for long-term projects with considerable expenses and borrowers who have erratic income sources. Personal lines of credit and how they operate, including looking at their benefits and drawbacks, will be discussed on this page.
In other words, a personal line of credit is a revolving account. This means that the borrower can use up to their allotted limit as needed, and then pay it back in full when capable (along with interest, of course). For example, if one just put $5000 on their card for car repairs but doesn’t have enough cash flow to cover those expenses immediately after receiving them, they could take out more money from their line of credit.
The interest rates are generally much higher, sometimes up to 36% APR* which can be a significant burden on the borrower. This is especially true for those who want or need funds in smaller amounts, because they’ll end up paying more over time with these higher rates than if they had just taken out one big loan sum from another source like a traditional bank, for example. Personal Lines of Credit also require an established credit history - without it, borrowers will not have access to this type of personal lending and may find themselves turning elsewhere. Additionally, some banks charge fees that vary depending on whether you use your card at home (interest free) or abroad ($25 per transaction).