Whether it’s a summer vacation, unplanned expense, or extra funds to bridge the gap between paydays, credit cards seem to be the popular choice, given their convenience. However, personal loans are often the better choice in terms of affordability.

Personal loans (also called signature loans) typically charge lower interest rates than credit cards. They also have set payments to help you avoid the long-term debt that often comes with credit card use. Much like a credit card, you can use money from a personal loan for just about anything.

What makes these loans even more versatile is that there are different types of personal loans – fixed loans and revolving lines of credit. Understanding the benefits of each option will allow you to decide which will work best for your unique financial situation.


The Basics of Personal Loans

A personal loan is a short-term loan that allows you to cover a variety of expenses. Key benefits are:

  • Unsecured Loans: Personal loans are unsecured loans, meaning no collateral is required of the borrower.
  • Short-Term: Most lenders offer loans ranging between 1-5 years. The term of the loan will often depend on the amount borrowed. Personal lines of credit have longer terms since they are open-end loans that operate similar to credit cards.
  • Versatile: Borrowers can use the funds however they wish – from covering vacation and wedding expenses to paying for car repairs or consolidating debt.
  • No Closing Costs: Unlike other loan options, such as a home equity loan, personal loans usually have no closing costs or upfront fees.
  • Easy Approvals: The application process is typically quick and easy, with funds often being dispersed on the same day.


Which Option is Right for You?

While the application process for personal loans and personal lines of credit (LOC) may be the same, the uses for each type of loan are often different. Both have their own set of benefits tailored to help cover your financial needs.

Personal Loans:

With a traditional personal loan, the money borrowed is given all at once in a lump sum payment upon approval. One of the main reasons members opt for a personal loan over a line of credit is the set payments and interest rate.

Personal loans have set monthly payments – similar to a car loan. With fixed payments, the borrower knows exactly when the loan will be repaid, avoids long-term debt, and usually pays less interest when compared to credit cards.

       Key Benefits:

  • Borrowing a set dollar amount makes it easier to stick to a budget and avoid overspending.
  • The entire loan amount is given at once, which is helpful if you need to make a single payment immediately (for example, home repairs).
  • The interest rate is fixed – it will not change over the course of your loan.
  • Set monthly payments allow the borrower to know exactly when the loan will be repaid.

       Common Uses:

  • Consolidating debt
  • Planning events (e.g., weddings)
  • Financing a vacation
  • Paying for car repairs
  • Covering home repairs or upgrades (when the cost is known upfront)

Personal Lines of Credit:

A personal line of credit operates very similarly to a credit card, but usually offers a lower interest rate. Upon approval, you will have access to a predetermined amount – much like a credit card limit. You can withdraw however much you wish, whenever you choose. Then, you pay it back monthly. You can pay the minimum amount due, more than the minimum, or pay it in full. Your personal budget will determine how much you can pay back on a monthly basis.

These types of loans work best when you might not know the entire scope of the costs upfront, such as ongoing home repairs. A key difference between a line of credit vs. a traditional personal loan is that the interest rates are typically variable. Meaning, they can fluctuate with the economy. 

       Key Benefits:

  • You only repay what you actually borrow. If you’re approved for $5,000 but only spend $750, you will only need to make payments on the $750.
  • Once you repay the borrowed amount, you can draw on the funds again as needed (similar to a credit card).
  • Depending on the lender, your revolving line of credit may be open-ended. This means the loan has no set end date. Money FCU’s line of credit has no set end date. You can use it, pay it off, and re-use it as long as you’re a member.

       Common Uses:

  • Ongoing medical expenses
  • Home repairs or upgrades (when total costs are unknown)
  • Cash flow assistance
  • Overdraft protection
  • Emergency life-line available as needed


Both personal loans and lines of credit offer financial perks and are often more affordable than credit cards. When choosing which loan type will work best for you, examine why you’re borrowing money. Is it for a one-time expense, such as a vacation, or to fund a wedding? Or do you need more flexibility and want to know the money is there whenever you need it?

We’re Here to Help!

Unsure whether a personal loan or line of credit is the best option for your needs? We’re ready to help. Our team will answer all your questions and review your unique situation to find the most affordable and flexible option for you.

Call, chat, text, or stop in! We’re here M-F, 9am-4pm ET. (315) 671-4000.



Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.