How Personal Loans Differ From Credit Line Loans

Are you about to borrow a personal loan, but have also heard about credit lines? They may seem similar, but they are not. Let’s look at each.

What are personal loans?

A personal loan is a sum of money offered to you based on your income, credit score and repayment ability. You apply for the loan based on your eligibility and other criteria, and the lending institution offers you the loan for a short tenure of up to a few months. You can repay the loan in monthly EMIs till it is fully repaid. You may use the personal loan for any purpose; you are not required to furnish a reason for applying for the loan.

What are credit line loans?

Meanwhile, leading loan apps in India offer customers credit line loans. These are small loans offered against a pre-approved credit limit. Depending on your salary, you may have a maximum credit limit of Rs 4 lakh with the best loan apps. You may borrow smaller sums of money against your credit limit, from time to time. Once your credit limit is exhausted, you cannot borrow till the line is restored once again. You can repay the borrowings from your salary, and the credit line is once again restored as is.

How do the two differ?

Though they seem quite similar to each other, there are some points of difference between personal loans and credit line loans. They are:

  • The personal loan is offered once based on your credit score and other factors. The credit loans can be taken repeatedly against the available credit limit.
  • You cannot take another personal loan unless you completely repay the one you have already borrowed. Suppose you have a personal loan eligibility of Rs 3 lakh but you borrowed only Rs 1.5 lakh. Now you need more money – you must first repay the Rs 1.5 lakh before applying for a fresh personal loan. However, you can take several small credit line loans till the credit limit is exhausted. Several retail loans are allowed against one credit line, depending on the app use.
  • A personal loan is given in a lump sum amount. You may then use the money for an emergency or to buy something expensive. However, you can borrow small sums against your credit limit for groceries, or for a small trip, or even to shop for clothes.
  • You are charged interest on the entire borrowed sum in a personal loan. But a credit line loan only charges you interest on the smaller sum you borrowed, and not the entire credit limit.


Know the difference between personal loans and credit line loans before you apply for either – as the points above explain.

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