Personal Credit Lines Advantages and Drawbacks

Personal Credit Lines Advantages and Drawbacks

There are numerous varieties of lines of credit (LOCs). The most commonly used one is the personal LOC. PLOCs can be a great solution if you have some unexpected personal expenses that you need to pay for in a short amount of time without any collateral (like a house or a car). The lenders are only relying on your word that you will repay the money you borrowed with this sort of financing option. For that reason, PLOCs are usually given only  to people with strong or excellent credit histories.

PLOC as a financing option

In comparison with some of the other alternative money-borrowing sources, this type of credit provides a number of benefits, however it is not the best option for everyone. If you are a small business owner, don’t be tempted to get a PLOC. There are far better options to finance your business.

PLOC is like any other loan, it comes with its own risks and obstacles. Therefore before making a final decision make sure you weigh the advantages and drawbacks to determine if it is the best fit for your needs . 

In this article you will find the main advantages and drawbacks that will be help you make a smart and inform decision. 


Easily accessible: During the draw period for this type of loan, you are permitted to borrow money whenever you need. Depending on the lender you choose, you do not even have to go to a bank or credit union. You can apply and get the found you need completely online without leaving your house.

Protection: Majority of PLOC lenders can allow you to get the money as overdraft protection on certain accounts, so you will not have to worry about overdrafting an account. This could provide you with better protection and security than some of the others loan types. 

Lower interest rates: Personal credit lines often come with lower rates of interest than some of the other loan types. The interest rate can vary depending on the lender and your credit history.

Collateral: A PLOC does not require any collateral as security. Therefore, if you do not have a property or car to assign as collateral, PLOCs may be the best option for you.

Payments: When it comes to payments, you are only responsible for paying when you actually withdraw money from the account. You can withdraw money up to your limit, and you only have to pay for the money you took out plus interest.


Non-Deductible: With this types of loans you cannot deduct the interest from your taxes because PLOCs are not tax deductible. 

Qualification: It can be challenging to apply for personal credit lines because of the fact that there is no collateral required. Which is why lenders require a higher credit score. This means that if your credit history is below average, you are less likely to get approved for PLOC.

Risk of overborrowing: Like any other type of loan, the risk of taking on too much debt is a major concern. Because you are permitted to borrow up as much as you want from your PLOC limit, you can easily overspend. And since must pay back everything you utilized during the draw time together with interest accumulated, this can result in a bigger debt than planned. 


PLOCs can be issued for any amount you require and utilized on a revolving basis, operating similarly to credit cards. This method of borrowing money has several benefits, including instant access to cash and more affordable rates than credit cards. But keep in mind that not everyone may want an account like this. To be eligible, you will need a strong credit history, and if you do not have one, you run the risk of not getting accepted. If you decide to acquire this type of loan, do your research to get the best conditions and interest rates for your circumstances.