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Should I Get a Personal Loan or Line of Credit? | Mogo

If you’ve found this page because you’re an avid Mogo Blog reader (we love you, hi, welcome) or because you’ve googled “personal loans”, “borrow money online”, or “line of credit vs loans”, well, WE GOT YOU. See how many sub-headers we got in this bad boy? An answer to every question, comin’ your way.

Borrowing money through a personal loan or a line of credit could help improve your finances. But which option—if any—could be right for you? Find out more here!

Should I Get a Personal Loan or Line of Credit?

Should you get a personal loan or line of credit? The short answer: maybe. They can be beneficial for your finances. But they can also be bad.

The long answer: When considering obtaining a loan, line of credit, or otherwise accruing any sort of debt, you have to do your own research and make your own decisions. It’s serious business, accruing debt. We’ve got info for you here, but in the end, you’ve gotta make your own choice based on your own personal set of circumstances.

What is a Personal Loan?

Personal loans are amounts of money that you can borrow from a lender to use as you wish. They are different from credit cards and other kinds of loans because they are typically paid out in a lump sum, and you can’t pay off the loan to free up available credit.

You can get personal loans from banks, credit unions, or other lenders. The terms of your loan—the maturity period, the interest rate, and other associated fees—can vary wildly. So you should do your own research to find the loan terms that best suit your needs.

Advantages of Personal Loans

Personal loans have several advantages.

For example, personal loans can be versatile. You can spend the money you borrow on basically anything, provided your lender hasn’t imposed any restrictions.

Personal loans can also be unsecured, meaning you don’t need to offer collateral to your lender against the value of the loan.

Personal loans can come with varying rates of interest which are typically lower than the rates major credit cards offer, but your exact rate will always depend on your credit score and financial situation and history.

Disadvantages of Personal Loans

For borrowers with bad credit, however, the terms of personal loans can be a bad deal, with high interest rates and expensive  associated fees. The lender may also request you offer collateral, like your home or car, against the value of the loan.

If you default on a personal loan payment or do not repay the loan amount in full before the end of the loan term, you may face high penalty fees.

Lastly, if you struggle to keep your debt down, obtaining a personal loan might not be a good idea. If you know you’re predisposed to overspending, you should seriously consider the potential ramifications of obtaining a personal loan.

When to Get a Personal Loan

You may consider obtaining a personal loan whenever you feel, after thorough research and consideration, that you will be able to make practical use of the borrowed money, and then repay that loan amount in full according to the lender’s terms.

Home renovations, buying a car, paying for a big ol’ fancy wedding, consolidating your debt, or going on a vacation, are all examples of big expenditures that a personal loan could help with.

What is a Line of Credit?

A line of credit is a fixed amount of money lent to you by a financial institution that you can use and repay over time. They are more like credit cards, where you have a certain limit and making payments against your balance owing frees up available credit.

Advantages of Lines of Credit

In our opinion, lines of credit have several advantages over personal loans.

For example, lines of credit generally offer lower interest rates than credit cards and some personal loans.

Lines of credit also allow you to spend only what you need—say, only $2,000 on a $10,000 line of credit—and interest is only charged on the amount that  you actually spend. So, if you only spent $2,000 on a line of credit with a $10,000 limit, you would only be charged interest on the $2,000.

There are flexible repayment options and you can often make use of a line of credit over a long period of time in a cycle of withdrawing and repaying your loan.

As such, lines of credit can be good for longer term top ups, like if you’re a freelancer and your income is irregular, or your business expenses are difficult to predict.

Disadvantages of Lines of Credit

But there are disadvantages too!

Maintaining a high balance on your line of credit, for example, can negatively impact your credit score—and you usually need good credit to be approved for a line of credit in the first place.

Because most lines of credit have variable interest rates, however, the cost of using your line of credit can be unpredictable because your interest rate can change.

And, like personal loans, having access to cash can enable poor spending habits. If you’re inclined to make impulse purchases, a line of credit could be dangerous.

When to Get a Line of Credit

Sorry! Same answer as above. You should only ever apply for  a line of credit when you’ve weighed all your options and found a lender that you trust and whose terms are agreeable to you.

A line of credit can be great in a lot of ways, but if you’re not going to use it responsibly and wind up deeper in debt with no way out, it’s a bad idea.

Get a Personal Loan online with Mogo

We’re always super cautious when it comes to recommending or even discussing the viability of accruing debt in the forms of personal loans or lines of credit, because when things go wrong, they can go really wrong. And we don’t want that for you.

But sometimes, accruing debt is indeed necessary (here’s a run down of scenarios, for your information!). Borrowing money is nothing to be ashamed of, but that debt must be managed properly. Do your research, and choose wisely.

If after all that you decide you are in the market for a personal loan, you’ve come to the right place! Cuz we got ‘em. Find out about pre-approval (which won’t impact your credit score!) in just three minutes on our website, and take any questions to our fabulous Product Specialist team.1

Let’s find a product that works for you!


This blog is provided for informational purposes only, is not intended as financial advice, and is not meant to suggest that a particular loan product or financial strategy is suitable for you. If you’re unsure about a particular financial decision, such as obtaining a personal loan or other loan product, you may wish to obtain advice from a qualified professional.

1-Pre-approval is based on information submitted in your MogoAccount application and/or other information that indicates you could meet our underwriting requirements. Your pre-approval for credit remains subject to our credit approval process which includes but is not limited to income and identity verification and validation of information submitted through the website. To meet our underwriting requirements further documentation may be requested from you. Minimum income requirements may apply for some products. Approval is not guaranteed and we reserve the right to deny services to you. Final approval is subject to review and verification of income and supporting documents provided.

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