Line of credit vs. personal loan: interest rates & eligibility
The Lendela Team
September 2nd, 2025
Table of contents
- Personal loans and personal lines of credit are both good loan options for quick cash.
- Personal loans come with a fixed term, interest rate, and monthly repayment instalments. They generally have lower interest rates and are good for bigger expenses that can be paid off over a certain amount of time.Lines of credit operate on a revolving basis, which grants individuals access to cash as long as they pay the balance back and do not overspend the credit limit. They usually come with higher interest rates and may tempt overspending with the seemingly unlimited access to funds.
- The eligibility for getting a personal loan or a line of credit is dependent on the individual’s annual income and creditworthiness, in addition to the specific requirements of the loan provider.
- Lendela’s loan comparison website takes into consideration personal details and preferences such as income, credit score, loan amount, and loan tenure to find the best loan options an individual is eligible to apply for.
If you find yourself in need of some quick cash, applying for a personal loan or a line of credit may be a good option for you. The question is, what is the difference between the two and which financial product best suits your individual needs? Both work very differently in terms of interest rates, repayment flexibility, and eligibility criteria.
Read on to explore the ins and outs of personal loans and lines of credit that help you make more informed decisions when it comes to your finances.
What is a personal loan?
A personal loan provides you with a flexible loan option to address temporary challenges regarding cash flow. They are one of the most diverse and resourceful banking products available in Singapore. Personal loans generally come with a fixed term, interest rate, and monthly repayment instalments, which are repaid over the loan tenure. Different personal loans have different interest rates and conditions depending on the bank or financial institution.
To help you easily sift through these many different options, Lendela's personalised services allow you to compare and find the best personal loan option in SG for your requirements.
What is a personal loan best used for?
Personal loans are usually great options for expenditures that can be paid off over a few years, including medical bills, home repairs or renovations, debt consolidation, educational purposes, wedding expenses, or vehicle purchases.
What is a line of credit?
A line of credit is another type of loan available in Singapore. With a personal line of credit, you are given a credit limit that you can utilise any time you wish for various financial purposes and purchases. You can repay the credit amount used as you go along each month in order to continue using your line of credit without hitting the limit, which means they operate on a revolving basis instead of fixed.
These loan tenures are usually quite flexible, and are also a good way to ensure easy, convenient access to cash. However, this level of flexibility and convenience might tempt some individuals to overspend. They often have high interest rates which fluctuate in accordance with your spending.
What is a line of credit best used for?
Similar to personal loans, lines of credit can be used for a multitude of financial purposes, such as debt consolidation, business expenses, vacations or travel expenses, and home renovations. They might be more useful for emergency expenses since this type of loan gives you quick access to funds that you can use at any time.
Personal line of credit vs. personal loan - a comparison
Personal loans and personal lines of credit both have their benefits and downsides. See the below table for a summary of their key differences so you can better compare the two:
Personal Loan | Personal Line of Credit | |
Flexibility | Limited flexibility in terms of repayment, has a fixed loan tenure with fixed monthly instalments | More flexible repayment options and schedule |
Interest Rates | Generally lower, fixed between 3.7% to 4.5% | Generally higher, varies between 18.6% p.a. to 20.9% p.a. |
Loan Terms | Ranges from 1 year up to 7 years | No fixed term, provides ongoing access to funds within the credit limit |
Repayment Terms | Fixed monthly payment instalments | Can vary between daily, monthly, or yearly payments |
Processing Fees | One-time processing fee, generally between 1% to 6% | Ongoing annual fee between $25 to $60 |
Additional Fees | Prepayment charges and early repayment penalties may apply | Transaction fees may apply |
Purposes of Use | One-time large expenses that have a set budget and timeline for repayment | Ongoing or various expenses that can be paid off over time |
Eligibility | Based on individual’s profile such as income and creditworthiness, as well as requirements of the bank or financial institution | Based on individual’s profile such as income and creditworthiness, as well as requirements of the bank or financial institution |
What is the best option for me?
Now that you are aware of the differences and similarities between personal loans vs. lines of credit, you might be in a better position to choose which type of loan you want to apply for in Singapore.
If you're still unsure, a quick summary is that a personal loan will offer you a fixed amount to be used over a fixed number of months. This is attached to a fixed interest rate. This type of loan might be better for you if your finances are planned or if you have a one-time expense in mind that you are sure you can repay in time.
On the other hand, a line of credit might be a better option for you if you need to use money more sporadically and for multiple purposes. Lines of credit do have higher interest rates on average compared to personal loans, which can make it more difficult to plan for future expenditure when calculating the interest charged every time you draw money from your credit limit.
Find the best personal loans with Lendela
If you have decided a personal loan is the right choice for you, Lendela's service is here to help. You can save hours of research time by filling out our online application form, which then uses our advanced matching algorithm to connect with renowned banks and financial institutions in Singapore. You will then be provided with the best personal loan options according to your profile (such as your monthly income, preferred loan term, and loan amount), so you can easily compare their rates, fees, and terms before making your decision. Apply for a personal loan with Lendela today to make all your financial decisions quicker and easier.
The Lendela Team
Lendela is a loan-matching platform that partners with 100+ financial institutions. We aim to deliver a transparent, safe, and personalised loan-matching experience, empowering borrowers with confidence to choose what truly fits. Since launching in 2018, we’ve helped hundreds of thousands of Singaporeans make smarter, more informed financial decisions through clarity and control.
