What is a personal line of credit? | How to get a personal credit line

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Wells Fargo started to inform consumers this week that it will be ending its credit product. CNBC reviewed letters from Wells Fargo, which stated that it would be focusing on personal loans and credit cards.

The bank also stated that consumers with a personal credit line might affect their credit scores if the product is terminated. Both consumers and critics of the banking industry were dissatisfied by this short notice.

What is a personal credit line? Select will walk you through the details of the product, as well as the pros and cons. It also explains how to apply so you can find the right one for you.

What is a personal credit line?

A personal credit, also known as PLOC or a fixed credit line, is a credit limit that you can access from a financial institution for a specific period. Many consumers use a personal line of credit to consolidate their debt, grow their businesses, pay their medical bills, refinance their existing debt, or renovate their homes.

A personal credit line is a hybrid of a credit card and a personal loan. There are some distinguishing characteristics.

  • A personal credit line can enable you to receive funds in installments, while a personal loan will allow you to receive a lump sum all at once.
  • Only the amount that you have withdrawn is subject to interest.
  • You may be eligible to withdraw funds again once the credit line is paid off. This feature may not be available all the time and depends on the lender.
  • Applying for and obtaining a line of credit may involve fees, such as application fees or maintenance fees. These fees will vary from one lender to the next.

There are advantages and disadvantages to a personal credit line

A personal line of credit can be beneficial in certain situations but not in others. It is essential to consider all options when making a personal finance decision.


A personal credit line is an excellent way of getting capital. Each lender may limit the number of your funds. Be sure to read the terms. These are some of the many benefits to using a personal credit line:

  • Accessibility of funds: You don’t have to withdraw the entire amount if you get a credit for $ 50,000. You can withdraw as much or as little as you like at any time. During a “drawdown” period, you will have full credit access.
  • You can refinance student loans and car loans with the funds. If you have a $ 20,000 car loan and a $ 10,000 student loan balance, you can apply to get $ 30,000 credit to repay both of those loans simultaneously. This could reduce the interest you pay.
  • Flexible loan: The lender can increase your credit line based on the repayment. Sometimes, this is called an open-ended credit transaction.

The inconvenient

Personal lines of credit are a unique type of loan product that has many advantages. However, there are some disadvantages.

  • Unsecured loans: Personal lines of credit are considered unsecured loans because they don’t require collateral. As the financial institution takes all risks, this usually leads to higher interest rates.
  • A high credit score is required: Because the loan is unsecured and can sometimes reach hundreds of thousands of dollars, it is common to need a credit score above 700.

Alternatives to a Personal Line of Credit

A personal line of credit can be an excellent option for consumers who need additional capital to reach their goals. Don’t worry if you don’t qualify. Consumers have other options for loan financing.

  • Personal loans The main difference between a personal loan and a line of credit is that a personal loan can only be closed transactions. The lender will issue funds and then wait for repayment on a specific schedule.
  • Credit card A credit card is used to finance short-term purchases. A personal line of credit is for more significant financial transactions and investments. Credit cards typically have higher interest rates than personal lines of credit. If you don’t pay all your monthly bills, you will have to pay additional fees and interest.
  • HELOC is short for the Home Equity Line of Credit. You can apply for equity from your home to finance. The interest rates for this secured loan will be generally lower than those for personal lines of credit.

How to get a personal credit line

It is easy to qualify for a personal credit line. After you have found a lender that offers a personal credit line that suits your needs, you will need to provide information about your financial situation. This could include:

  • Statements from banks
  • Investment portfolio
  • History of employment
  • Income proof
  • Declare the use of the line of credit

The credit score is also going to be checked. So make sure you’re paying attention to your credit to avoid any mistakes.

Banks that offer personal credit lines

While Wells Fargo has discontinued the personal line credit product, many banks offer it. Every institution has different terms and fees, so make sure you compare them all to find the right one for you.

The end of the line

Personal lines of credit can be used to manage debt, build a business or renovate a house. While Wells Fargo has removed the product from its offerings, there are still banks that offer it. A personal line of credit can be an asset in your financial planning if you have the right terms and interest rate.

Editorial Note: All opinions, criticisms, or recommendations contained in this article are solely the responsibility of Select’s editorial staff and have not been approved, endorsed, or otherwise approved by any other party.

Author: Kimberly Chantal Parkes

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Kimberly Chantal Parkes is a former contributor to Rixloans. Kimberly Chantal is a freelance copy editor and writer with a specialization in personal financial planning. After having graduated from Kansas State University with a bachelor's degree in journalism, she began her career in media wearing many hats for community newspapers within the Kansas City area: writer as well as copy editor, photographer and coffee runner among other things.

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