Choosing between a personal loan, a line of credit and a credit card comes down to one question: do you need structure or flexibility? A personal loan has fixed monthly payments that end the debt on a set date, so minimum-only payments aren’t an option. A line of credit usually has a lower rate but lets you pay interest only for as long as you like. A credit card costs the most once you carry a balance, but it is the only one of the three with a grace period and rewards. The right fit depends on the amount, how quickly you will repay and how you tend to handle open-ended credit. This comparison is part of the personal loans and lines of credit hub.
Quick Comparison
| Feature | Personal Loan | Line of Credit | Credit Card |
|---|---|---|---|
| Type | Fixed instalment | Revolving | Revolving |
| Interest rate | Fixed or variable, set by credit score | Variable: prime plus a spread | Fixed purchase rate, often 19.99% or more on standard cards |
| Payment structure | Fixed monthly payments | Often interest-only minimum | Minimum of a small share of the balance |
| Forced payoff | Yes (set term) | No | No |
| Borrowing limit | About $1,000 to $50,000 | About $5,000 to $50,000 or more | About $1,000 to $25,000 or more |
| Rewards | No | No | Yes, on rewards cards |
| Access to funds | Lump sum upfront | Draw as needed | Draw as needed |
| Typical fit | Large, planned expenses | Flexible, ongoing access | Purchases paid off each month |
Interest Rates
With prime at 4.45%:
| Product | Typical rate |
|---|---|
| Secured line of credit (HELOC) | From prime + 0.5% (4.95%) |
| Unsecured line of credit | Commonly prime + 3% to 4% (7.45% to 8.45%) for good credit |
| Personal loan (bank) | About 7% to 13% |
| Personal loan (online lender) | About 8% up to the legal maximum |
| Credit card (standard) | 19.99% to 22.99% on most cards |
| Credit card (low-rate) | For example, the MBNA True Line Mastercard at 12.99% |
| Credit card (store) | Often 25% to 29.99% |
Line of credit spreads by lender and by credit score are on the line of credit rates page; personal loan lenders and their ranges are on personal loan lenders and rates.
Annual interest on a $10,000 balance carried for a year:
| Product | Rate | Annual interest | Monthly interest |
|---|---|---|---|
| HELOC | 4.95% | $495 | $41 |
| Unsecured line of credit | 7.95% | $795 | $66 |
| Personal loan | 10% | $1,000 | $83 |
| Credit card | 19.99% | $1,999 | $167 |
| Store credit card | 28.99% | $2,899 | $242 |
When Each One Fits
| Situation | Personal loan | Line of credit | Credit card |
|---|---|---|---|
| Consolidating debt | Fixed rate and a set end date | Lower rate, but no forced payoff | Only through a promotional balance transfer |
| Large planned purchase ($5,000+) | Fixed budget, predictable payments | Works if repaid on a plan | Costly if the balance is carried |
| Renovation paid in stages | Lump sum up front | Draw as costs arise | Costly if carried |
| Emergency backup | Not suited | Draw only when needed | Small amounts, repaid quickly |
| Irregular or self-employed income | Not suited | Covers lean months | Not suited for large gaps |
| Everyday spending | Not suited | Not suited | Rewards and a grace period if paid in full |
| Online purchases | Not suited | Not suited | Chargeback rights |
Repayment Compared: $10,000
This is where the cost differences show.
A personal loan at 10% over three years costs $1,616 in interest and reaches a $0 balance on schedule. A line of credit at 8.5% has a smaller monthly payment, but on interest-only minimums the full $10,000 is still owed after three years, after $2,550 in interest. A credit card at 19.99% with a minimum payment of 3% of the balance takes about 25 years to clear and costs about $12,200 in interest, more than the original balance. The lowest rate isn’t always the lowest total cost.
Personal Loan (10%, 3-Year Term)
| Month | Payment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | $323 | $83 | $240 | $9,760 |
| 12 | $323 | $60 | $262 | $6,993 |
| 24 | $323 | $33 | $290 | $3,668 |
| 36 | $323 | $3 | $320 | $0 |
| Total | $11,616 | $1,616 |
Line of Credit (8.5%, Interest-Only Minimum)
| Month | Minimum Payment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | $71 | $71 | $0 | $10,000 |
| 12 | $71 | $71 | $0 | $10,000 |
| 24 | $71 | $71 | $0 | $10,000 |
| 36 | $71 | $71 | $0 | $10,000 |
| Total (3 years) | $2,550 | $2,550 | $0 | $10,000 still owing |
Credit Card (19.99%, Minimum Payment 3%)
| Month | Minimum Payment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | $300 | $167 | $133 | $9,867 |
| 12 | $259 | $144 | $115 | $8,511 |
| 24 | $220 | $122 | $98 | $7,244 |
| 36 | $187 | $104 | $83 | $6,166 |
| Payoff time | About 25 years | |||
| Total paid | About $22,200 | About $12,200 interest |
The interest-only minimum on a line of credit is the main trap; the line of credit calculator shows how a fixed payment above it changes the payoff time.
Effect on Your Credit Score
All three affect your credit score, in different ways. A personal loan is instalment credit: it adds to your credit mix and doesn’t count toward your revolving utilization. Lines of credit and credit cards are both revolving, and a balance above about 30% of the limit weighs on the score. Moving $8,000 from a $10,000 card limit to a personal loan can lift the score quickly through the drop in utilization.
| Factor | Personal Loan | Line of Credit | Credit Card |
|---|---|---|---|
| Hard inquiry (applying) | A small, temporary dip | A small, temporary dip | A small, temporary dip |
| Credit mix | Adds instalment credit | Adds revolving credit | Adds revolving credit |
| Utilization ratio | Not counted | Counted (many keep it under 30%) | Counted (many keep it under 30%) |
| Payment history | Helps if paid on time | Helps if paid on time | Helps if paid on time |
Consolidating Credit Card Debt
Consolidation is the most common reason people compare these products. Moving $15,000 of card debt at 19.99% to a debt consolidation loan at 10% or a line of credit at 8.5% cuts the interest sharply. The loan’s fixed payments guarantee payoff; the line is cheaper per month but works only if payments stay above the minimum, since otherwise the debt just moves without shrinking.
$15,000 of credit card debt:
| Strategy | Rate | Monthly payment | Total interest | Payoff |
|---|---|---|---|---|
| Keep on the card, paying the minimum | 19.99% | $450 at first (3% of the balance, falling) | About $18,500 | About 28 years |
| Balance transfer card (0% for 12 months) | 0%, then the card’s regular rate | $1,250 | The transfer fee only, if paid within 12 months | 12 months |
| Personal loan (10%, 3 years) | 10% | $484 | $2,424 | 3 years |
| Line of credit, paying the same $484 | 8.5% | $484 | $1,996 | About 3 years |
Where to Get Each Product
| Product | Where | Notes |
|---|---|---|
| Personal loan | Big 5 banks, credit unions | Rates quoted after application, set by credit score and the banking relationship |
| Personal loan | Online lenders such as easyfinancial, and marketplaces such as Loans Canada and LoanConnect | Rates run up to the 35% APR legal maximum; bad credit loans explains the criminal interest rate cap |
| Line of credit | Banks, credit unions, online banks | Spreads by lender are on the line of credit rates page; a HELOC from a mortgage lender, compared in HELOC vs personal line of credit |
| Credit card | Banks and card issuers | A low-rate card, a balance transfer promotion (confirm the current offer) or a secured card for rebuilding credit |
Choosing Between Them
| Question | Personal Loan | Line of Credit | Credit Card |
|---|---|---|---|
| Need a fixed payoff schedule? | Yes | No | No |
| Rate matters most? | Moderate | Usually the lowest of the three | Highest once a balance is carried |
| Need flexibility? | Low | High | Moderate |
| Want rewards? | No | No | Yes |
| Paying off within a month? | Unnecessary | Unnecessary | No interest within the grace period |
| Amount over $5,000? | Strong fit | Good fit | Expensive |
| Amount under $1,000? | Unnecessary | Good fit | Fine if repaid quickly |
| Tendency to overspend? | Fixed payments help | Interest-only minimums are a risk | Minimum payments are a risk |
A personal loan fits when a guaranteed payoff date matters most. A line of credit suits flexible, shorter-term borrowing when payments will stay above the minimum. A credit card works for purchases paid in full each month; once a balance is carried, its rate is the highest of the three. The two-way line of credit vs credit card question has its own page in the credit cards section. Students weighing a student line of credit against government student loans have a separate comparison in student line of credit vs student loan.
Sources
The figures and rules on this page come from these sources, last checked against them on October 2, 2026. How we check facts.