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Orginally posted by happy2004

Hi there,

What is the diffrence between Loan and Line of Credit Loan ? Which one is better ?

Thanks in advance.

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Loan is a one time credit while Line of Credit like Credit Cards is a Revolving Credit.

In loans you get approved once for a fixed limit, borrow the funds and then repay in instalments the entire principal and interest over time as in your car loan, consumer loan or mortgage and the balance keeps on decreasing and ultimately paid off.

In lines of credit you generally pay interest only or you can repay the borrowed funds and bring down the balace but if you need to borrow again you can simply cut a cheque of transfer funds and the debit balance in your account goes up again and you do not need to get yourselves approved again. It works exactly as a credit card wherein you can use it up to the limit sanctioned, pay off your monthly bill and you are ready to use again.

Which one is better? It basically depends on your present needs and future requirements and the interest being charged. While in lines of credit you have the facility of paying down entirely and borrow again as you wish you do not have the same in loans. The line of credit offers you more flexibility but makes borrowing your habit and most of the times people fall in 'debt trap' because this credit is available to them freely. However, in loans you do not have this free availabilty of the credit and hence you are forced to pay out the entire debts.

The choice is yours. If you need any other information or help, you can PM me.

Good Luck