What are line of credit personal loans?

author-avatar By on May 14, 2021
What are line of credit personal loans?

Line of credit personal loans can often be a more flexible alternative to standard personal loans and credit cards.

What are line of credit personal loans?

A line of credit personal loan allows access to a pre-determined amount of funds you can withdraw at your discretion. You repay these borrowed funds via monthly repayments and are typically charged a variable interest rate.

While making monthly repayments, you also have the ability to withdraw additional funds, provided you haven’t exceeded your agreed credit limit with the lender. Importantly, you’re only charged interest on the money you’ve withdrawn, not your balance. So if you had a balance of $20,000 and you withdrew $5,000, you’d only be charged interest on $5,000.

In the market for a personal loan? The table below features personal loans with some of the lowest interest rates on the market.

If you think a line of credit personal loan sounds a lot like a credit card, you’d be correct. There are a lot of similarities between the two but there are some key differences. Line of credit personal loans often have much higher credit limits than credit cards and also tend to have lower interest rates. Lenders only require you to submit a credit application when you first take out the loan, not each time you withdraw funds. Some lenders even have the option to link your line of credit personal loan with a debit card, making withdrawals simple.

Much like a credit card, you can use a line of credit personal loans for whatever you wish. Whether that’s a holiday, renovations, a vehicle, or some random purchase, lenders typically don’t place restrictions on what you can use the funds for. Additionally, you rarely have to inform the lender about what you plan to use the funds for.

What’s the difference between personal loans and line of credit personal loans?

It can be easy to get personal loans and line of credit personal loans mixed up, not least because of their similar names. One of the biggest differences is how you borrow the funds. A personal loan allows you to borrow a lump sum, which is paid directly to you or to a supplier for a product. A line of credit personal loan gives you access to a pool of funds that you can withdraw a portion of at a time of your choosing.

Personal loans are often a lot more rigid than their line of credit personal loan cousins. They typically have a fixed loan term, from one to seven years, a fixed interest rate, and a fixed monthly repayment. Line of credit personal loans often have variable interest rates and your monthly repayments will change based on how much you borrow. There’s also not usually a time period you’re required to repay the funds back and instead you’ll have a minimum monthly repayment. Additionally, the funds are again available for withdrawal after you’ve repaid them.

Line of credit personal loans typically come with smaller loan amounts than personal loans. It’s rare to have access to more than $50,000 with a line of credit personal loan, whereas a personal loan could afford you as much as $100,000, depending on the lender and your credit score.

Personal loans also come with upfront and ongoing fees, like establishment fees and monthly service fees, while a line of credit personal loan typically charges an annual service fee.

These differences mean personal loans and line of credit personal loans appeal to different groups of people. Borrowers who are looking for flexibility and access to short-term credit may be more inclined to take out a line of credit personal loan. Borrowers who are after more cash flow certainty and a larger loan amount might be keener on a personal loan.

Are line of credit personal loans secured or unsecured?

Line of credit personal loans can be secured or unsecured, depending on your circumstances and the lender. Security refers to securing the loan against an asset you own, like using a car you borrow a loan for as security.

More often than not, security will give you a better chance of being approved, access to higher loan amounts, and potentially a lower interest rate. An unsecured line of credit personal loan may be difficult to obtain if you have a less than impressive credit history, and if you are approved, you may be stung with a higher interest rate and fees.

Related: Secured vs unsecured personal loans: Which is right for you?

What to consider when looking for a line of credit personal loan

If you’re shopping for a line of credit personal loan, some of the factors you should consider include:

  • Interest rates: As with any credit product, reviewing interest rates is one of the most important things you can do. Interest rates on line of credit personal loans have a large range and often come down to your personal circumstances and credit score. Shopping around for a rate is vital and adding security may drop your rate.

  • Fees: Most line of credit loans have an annual service fee but this isn’t a uniform cost across the board. Additionally, different lenders may have other fees on top of this. Check the comparison rate to see the true cost of the loan.

  • Fund accessibility: Line of credit personal loans are often attractive to people because of the pool of funds available for withdrawal. But if the funds aren’t very accessible, this benefit is rendered obsolete. Check out what the process is for withdrawal before entering into any contracts and see whether you can link a transaction account or debit card.

  • Loan amount: Line of credit personal loans often don’t have large loan amounts available for withdrawal. If you’re looking to borrow more than $50,000, you may be better off considering a regular personal loan.

  • Repayment terms: There are typically two ways you can make repayments on line of credit personal loans. Revolving credit allows you to keep the loan open for as long as you see fit, provided you’re making repayments. Term-plan line of credit loans require you to make repayments over a period of time, typically up to five years. Be sure you know which one the lender requires before borrowing any cash.

Who offers line of credit personal loans?

A number of larger lenders like the big four - ANZ, Commonwealth Bank, NAB, and Westpac - offer line of credit personal loans. You can also access them through peer to peer (P2P) lending via platforms like Wisr and Plenti. Whichever you end up going with, be sure to do your research prior; the personal loan market is rife with smaller lenders who in some cases can be less than reputable.

Related: Providers offering peer to peer loans in Australia

How to apply for a line of credit personal loan

Applying for a line of credit personal loan will differ between lenders but the process will typically resemble the following:

  1. Shop around lenders to find one with a competitive interest rate and that suits your personal circumstances, taking into account other factors like fees, loan amount, repayment terms, and fund accessibility.

  2. Submit your application to your desired lender. This will include information like personal details, proof of income and employment, and lists of your assets and expenses.

  3. The lender will review your application. Some lenders will have same-day approval while others could take a week. Line of credit personal loans are typically easier to approve than other credit products.

  4. After the lender approves you, look over the contract to ensure everything is as agreed, like the interest rate. You can then sign off on the loan and have access to the funds shortly.

Pros and cons of line of credit personal loans


  • Only charged interest on the funds you borrow, not your balance.

  • Flexibility to withdraw funds when you want

  • Accessibility through ATMs, debit cards, transaction accounts


  • Annual fees regardless of whether you withdraw funds

  • Temptation to overspend funds

  • Appears on your credit report, so it may affect other loan applications

Savings.com.au’s two cents

Line of credit personal loans can provide a great safety net and easy access to funds in the event of an emergency. However, a large sum of money sitting in an account available for you to use when you wish could tempt borrowers to overspend or make purchases they don’t need. Always budget accordingly and ensure you can make repayments before spending any money.

Photo by Brooke Cagle on Unsplash


The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:
  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $30,000 loan over 5 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.


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