Personal Line of Credit guide covering how it works, interest rates, pros and cons, and smart alternatives like personal loans and HELOCs in 2026.
Personal Line of Credit: How It Works, Rates & Alternatives
A personal line of credit (PLOC) is a flexible borrowing option that allows you to access funds when you need them, and only pay interest on what you use.
Unlike a personal loan, which provides a lump sum upfront, a personal line of credit works more like a credit card with a reusable credit limit.
In this guide, we’ll explain how a personal line of credit works, when to use one, the pros and cons, and whether alternatives like a personal loan may be a better fit.
What Is a Personal Line of Credit?
A personal line of credit is a revolving credit account with a set borrowing limit. Once approved, you can withdraw funds as needed, repay them, and borrow again during the draw period.
Key Features in 2026
- Flexible borrowing up to a credit limit
- Revolving access to funds
- Interest is charged only on the amount used
- Minimum monthly payments required
- Possible interest-only payments during the draw period
Unlike many credit cards, personal lines of credit typically do not offer rewards, but they often carry lower interest rates.
How a Personal Line of Credit Works
A personal line of credit has two phases: the draw period and the repayment period. During the draw period, you can borrow up to your limit, repay it, and borrow again while making minimum monthly payments plus interest. Once the draw period ends, the repayment period begins; you can no longer withdraw funds and must pay back the remaining balance.
Draw Period vs Repayment Period
| Feature | Draw Period | Repayment Period |
|---|---|---|
| Borrowing Access | You can borrow up to your approved credit limit. | You can no longer borrow additional funds. |
| Payment Structure | You may be allowed to make interest-only payments. | You must repay both principal and interest. |
| Access to Funds | Funds can be transferred to your bank account or withdrawn as needed. | No new withdrawals are permitted. |
| Credit Reuse | As you repay, credit becomes available again (revolving). | Credit cannot be reused once repayment begins. |
| Monthly Payments | Payments are often lower if interest-only is allowed. | Monthly payments may increase since principal repayment begins. |
| Interest Rate | Often variable and may fluctuate with market conditions. | May remain variable or convert depending on lender terms. |
| Best For | Ongoing or uncertain expenses where flexibility is needed. | Structured payoff of the remaining balance. |
Personal Line of Credit vs Personal Loan
Choosing between a personal line of credit and a personal loan depends on your needs.
Major Differences
| Personal Line of Credit | Personal Loan |
|---|---|
| Revolving credit | Installment loan |
| Borrow as needed | Lump sum upfront |
| Often variable rate | Usually fixed rate |
| Flexible repayment | Fixed monthly payments |
If you prefer predictable payments and protection from rising interest rates, a personal loan may be the safer option.
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Where to Get a Personal Line of Credit in 2026
You can find personal lines of credit at:
- Traditional banks
- Credit unions
- Select online lenders
Some are secured (require collateral), while others are unsecured.
Important Note About SoFi
SoFi does not currently offer unsecured personal lines of credit. However, they do offer:
- Personal loans
- Home Equity
- Lines of Credit (HELOCs)
How to Get a Personal Line of Credit
Applying for a personal line of credit is similar to applying for other forms of financing, such as a personal loan or credit card. Lenders evaluate your creditworthiness, income stability, and overall financial profile before approving you.
| Step | What to Do | Key Details |
|---|
| Step 1 – Check Your Credit Score | Review your credit profile before applying. | Your credit score affects approval chances, credit limit, and interest rate. Prequalification usually involves a soft credit check, which does not impact your score. |
| Step 2 – Compare Rates and Terms | Evaluate lender offers carefully. | Compare APR (fixed or variable), draw period length, fees, and repayment structure before choosing a lender. |
| Step 3 – Submit Application | Complete the formal application. | A full application typically triggers a hard credit inquiry, which may temporarily lower your credit score. |
When Should You Use a Personal Line of Credit?
A personal line of credit works best for flexible or phased expenses.
| Category | Details |
|---|---|
| Home Renovations | Ideal when renovation expenses occur gradually over time. |
| Variable Project Costs | Borrow only what you need, helping reduce unnecessary interest charges. |
| Disadvantages of a Personal Line of Credit | Before opening one in 2026, carefully consider the potential risks. |
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Personal Line of Credit vs Credit Card
Both are revolving credit accounts, but serve different purposes.
Usage Differences
Credit cards are ideal for small daily purchases and may offer rewards.
Personal lines of credit are better suited for larger transfers or structured borrowing.
Interest Rate Differences in 2026
Credit cards generally carry higher APRs than personal lines of credit.
Your credit score plays a major role in determining your rate.
Alternatives to a Personal Line of Credit
If a personal line of credit isn’t the right fit, consider these options.
1. Personal Loan
A personal loan may be better if you want:
- Fixed interest rates
- Predictable monthly payments
- No revolving debt
- Lump-sum funding
SoFi offers competitive fixed-rate personal loans with no required fees and potential same-day funding.
Check Your Rate With SoFi Personal Loans (No Impact to Credit Score)
Home Equity Line of Credit (HELOC)
A HELOC uses your home as collateral and may offer lower interest rates. However, your home is at risk if you default.
Explore SoFi HELOC Options Here
Credit Cards
Credit cards may work for small expenses, but often come with higher interest rates.
Is a SoFi Personal Line of Credit Right for You in 2026?
| May Be Right If… | May Not Be Ideal If… |
|---|---|
| You need flexible borrowing. | You prefer fixed monthly payments. |
| Your expenses are ongoing or unpredictable. | You’re financing a one-time expense. |
| You want potentially lower rates than credit cards. | You want payment stability in a rising-rate environment. |
Final Thoughts
In 2026, a personal line of credit continues to be a flexible financing option for borrowers who need revolving access to funds. However, variable rates and the risk of long-term debt mean it’s important to compare alternatives carefully.
If you prefer fixed payments and predictable costs, a personal loan may be the smarter option.
👉 See If You Qualify for a SoFi Personal Loan Today