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The difference in one paragraph
A personal loan hands you a fixed amount once, and you repay it in equal payments until a printed end date. A line of credit approves a limit you can draw on, repay and draw again, paying interest only on what is outstanding. The loan is a commitment that ends; the line is a facility that stays. The whole choice on the personal loans market follows from that shape.
Side by side
| Personal loan | Line of credit | |
|---|---|---|
| You receive | One lump sum | A limit to draw on |
| Payments | Fixed, monthly | Minimum on the balance |
| Interest | On the full amount, declining | Only on what is drawn |
| Rate | Fixed or variable, set at signing | Variable, moves with prime |
| Ends | On a set date | Stays open |
| Best for | A defined expense | Repeating or uncertain needs |
Which fits which situation
- A defined one-time expense: the loan. A repair, a consolidation, a procedure. Borrow the number, repay the number, done. Across Smarter Loans personal loan applications from August 2025 to July 2026, the average request was $2,604, a one-expense size, which is why most borrowing is loan-shaped.
- Repeating or unpredictable needs: the line. Seasonal income, ongoing projects, a safety net you arrange before the emergency. Drawing $800 twice a year from a line beats taking two loans.
- Discipline decides more than product. A line's flexibility is its risk: a balance with no end date invites staying borrowed. If open-ended credit tends to stay open in your hands, the loan's fixed end date is a feature, not a limit.
The same $5,000 on each, in dollars
The same $5,000 on each
| Route | Monthly payment | Months to clear | Total interest |
| Personal loan | $168.45 a month | 36 months | $1,064.04 interest (12.99%) |
| Line of credit at the same payment | $168.45 a month (matched) | 35 months | $767.12 interest (9.99%) |
At the same payment the cheaper-rate line wins on interest; the risk is behavioural, since nothing in the line requires that payment.
Illustrative example, not quoted offers: a 12.99% APR loan over 36 months against a 9.99% line of credit drawn in full and repaid at the same monthly amount. Your rates depend on your credit and lender.
To price your own amount, the personal loan calculator runs any rate and term.
Getting approved for each
Lines of credit are the harder approval: banks price the best ones for strong credit and existing customers, and the decision takes days. Personal loans span the whole market, from bank rates to specialist lenders that approve fair and poor credit on income, decided in minutes online. If a bank line is available to you at a good rate, it is worth holding even if you do not draw on it today. If it is not, the loan market is the practical route.
| Lender | Amount | Rate | Speed | |
|---|---|---|---|---|
| MDG Financial | $3,200 to $20,000 | 19.8 to 34.99% APR | within 24 hours | See if you qualify |
| Spring Financial | $500 to $35,000 | 9.99% APR | about 2 business days | See if you qualify |
| Loan Away | $1,000 to $5,000 | 19.9 to 34.5% APR | within 24 hours | See if you qualify |
| Alterfina | $500 to $2,500 | 18.99% APR | within 24 hours | See if you qualify |
| easyfinancial | $500 to $20,000 | 9.99 to 34.99% APR | about 2 business days | See if you qualify |
The personal loans page compares both product types across every lender we list.
Frequently asked questions
Is it better to get a personal loan or a line of credit?
For a defined one-time expense, the loan: fixed payment, known total cost, an end date. For repeating or uncertain needs, the line: draw what you need, pay interest only on the balance. Neither is better in general; the shape of the need decides.
Is a line of credit cheaper than a personal loan?
Usually per dollar drawn, because line rates run lower and interest applies only to the outstanding balance. But lines are variable-rate and open-ended, so an undisciplined balance can cost more over years than a loan would have over a term. Cheaper per month is not the same as cheaper overall.
Does a line of credit hurt your credit score?
Opening one adds a hard inquiry and a new account, a small dip either way. After that it can help: a line reporting a low balance against its limit improves your utilisation. A line drawn near its limit does the opposite.
Sources
- Canada Gazette, SOR/2024-114, for the 35 percent cap.
- Smarter Loans personal loan applications, August 2025 to July 2026, for the average-request figure.
Related reading: when should you use a personal loan and how much line of credit can I get.
Written by:
The Smarter Loans Editorial Team produces in-depth, original content to help Canadians navigate borrowing, credit, and personal finance with confidence.
