How the comparison works
A line of credit charges simple daily interest on the amount drawn: amount × APR ÷ 365 × days. The loan is an equal-payment loan whose monthly rate is the APR divided by 12, with an optional origination fee paid in cash. The line is assumed to stay at the full amount for every day you enter; the loan is repaid over its term. A US bank overdraft is usually a per-item fee, so this page compares a line of credit, which some banks link to checking accounts, with a loan.
Worked example: $5,000 for 30 days
A line of credit at 18% costs $73.97 in interest on $5,000 for 30 days. A 12-month personal loan at 12% APR for the same $5,000 is $444.24 a month and $330.93 of interest. The line is cheaper by $256.95 for a month. The two cost the same at 134.2 days, with the line costing $2.47 a day.
When the line is dearer
For a full year on $8,000 at 22%, the line costs $1,760.00 against the loan's $529.48 in interest, so the loan is cheaper by $1,230.52. With a 4% origination fee on a 36-month, 9.5% loan for $5,000, the loan's total cost is $965.93.
What this calculator leaves out
It assumes the line stays at the full amount for all the days, with the rate unchanged. Paying it down would lower its cost. A real loan depends on your credit record. Annual fees, draw fees and a variable rate are not modelled.
To price a per-item overdraft fee, use the overdraft fee and interest calculator.
To compare two loans, use the compare loans calculator.
Use the right country page
This page compares a US line of credit with a loan in dollars. The country choices above the inputs open separate local pages. Choosing United Kingdom opens the UK overdraft vs personal loan calculator, which prices an overdraft from an effective annual rate in pounds. Inputs reset and amounts are not converted.
Inputs for the line of credit vs loan calculator
Amount you need
The amount you would borrow on the line of credit or as a loan.
Days on the line of credit
How many days you would keep the full amount drawn. A whole number up to 3,650.
Line of credit APR
The yearly rate on the line of credit, charged daily on the drawn amount.
Loan APR
The APR of the personal loan you could take instead.
Loan term
The months you would take to repay the loan. A whole number up to 120.
Loan origination fee
A percentage of the loan, paid in cash. Enter zero for none.
CALCULATOR QUESTIONS
US line of credit vs loan calculator questions
Is a line of credit cheaper than a loan?
For a short need, usually. $5,000 for 30 days at 18% costs $73.97 against $330.93 on a 12-month loan at 12%.
How long before the loan is cheaper?
In the example, about 134.2 days.
How is line-of-credit interest worked out?
Amount × APR ÷ 365 × days. $5,000 at 18% costs $2.47 a day.
Do I include the loan fee?
Yes: enter any origination fee as a percentage. A 4% fee on a $5,000 loan is $200.00.
Is a US overdraft the same as a line of credit?
No. An overdraft is usually a fee for each item the bank pays. A line of credit linked to checking charges interest on what you draw.