Line of credit vs. personal loan: interest rates & eligibility

Compare personal loans and lines of credit in Singapore — interest rates, eligibility, repayment terms, and which option suits your needs best.

Key Takeaways

✓ 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.

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

Comparing a personal loan with a line of credit? If you want the broader picture – including DCP, balance transfer, renovation, and education loan routes – read our guide to loan types & when to use them. 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, typically from ~2% to ~5.5% EIR depending on bank, profile, and tenure	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.

Frequently asked questions about personal loans vs. lines of credit

What is the main difference between a personal loan and a line of credit in Singapore?

A personal loan gives you a fixed lump sum with a fixed interest rate, fixed monthly repayments, and a set tenure of up to 7 years. A line of credit gives you a revolving credit limit you can draw from and repay repeatedly – but with higher interest rates that typically range from 18.6% to 20.9% p.a., compared to a personal loan’s lower fixed rates.

Which has a lower interest rate – a personal loan or a line of credit?

Personal loans generally have lower interest rates. Banks in Singapore advertise flat rates starting from around 1% p.a. (EIR from approximately 2%), while personal lines of credit typically charge 18.6% to 20.9% p.a. on drawn amounts. If you know exactly how much you need and can repay it over a fixed period, a personal loan is almost always the cheaper option.

When is a line of credit a better choice than a personal loan?

A line of credit may suit you better if you need flexible access to funds over time rather than a single lump sum – for example, for ongoing business expenses or irregular costs where you draw what you need and repay as you go. However, the higher interest rate means it is more expensive if balances are not repaid quickly.

Can I get both a personal loan and a line of credit in Singapore?

Yes, subject to MAS unsecured credit limits. The total unsecured credit across all facilities – personal loans, credit cards, and lines of credit – is capped at 12 times your monthly income. Banks will assess your existing obligations when determining eligibility for any new facility.