Loan vs Line of Credit Calculator

A personal loan gives you a lump sum upfront that you repay in fixed monthly installments over a set term. A line of credit is a revolving credit limit you can draw from as needed, typically featuring a draw period with interest-only payments followed by a repayment period. Loans suit one-time expenses; lines of credit work better for ongoing or unpredictable needs.

Personal loans typically carry lower fixed interest rates than lines of credit, especially unsecured ones. A line of credit usually has a variable rate that can fluctuate with the market. If you qualify for a competitive fixed rate on a loan, it often results in less total interest paid over time.

A line of credit is a better fit when you're not sure exactly how much you'll need — for example, home renovations, medical bills, or business expenses that roll in over time. You only pay interest on what you actually borrow, so if you don't use the full limit, your interest cost stays lower.

The draw period is a set timeframe — often 6 to 24 months — during which you can borrow from your line of credit up to your credit limit. During this phase you typically make interest-only payments. Once the draw period ends, no new draws are allowed and the repayment phase begins, requiring principal + interest payments.

Yes. Any extra amount you pay beyond the required monthly payment reduces your principal balance faster, which means you accrue less interest over the life of the loan. Use the 'Extra Monthly Payment' field in this calculator to see exactly how much you could save.

Most personal loans come with a fixed interest rate, meaning your monthly payment stays the same for the entire term. Lines of credit, by contrast, almost always carry variable rates tied to a benchmark like the prime rate, so your payment can change month to month.

The calculator computes the fixed monthly payment, total interest, and total cost for the personal loan using standard amortization. For the line of credit, it calculates interest-only payments during the draw period and amortized payments during the repayment period, then sums up total interest and cost for a direct comparison.

Yes. If you draw the full credit limit on day one, a line of credit effectively behaves like a loan for interest calculation purposes. However, lines of credit often have variable rates and different fee structures, so the total cost can still differ from a traditional fixed-rate loan.