Difference Between Personal Loan and Line of Credit

Difference Between Personal Loan and Line of Credit

A personal loan pays you the full amount at once, and you repay it in fixed, equated monthly instalments (EMIs). A line of credit gives you a limit to draw from as needed, with interest on what you use.
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In summary

A personal loan is suitable for a one-time, known expense, such as a hospital bill, while a line of credit is useful when expenses arise in stages, such as during a home renovation. Bajaj Finance does not offer a line of credit as such, but its Flexi Dropline Loan and Flexi Hybrid Loan offer similar borrowing flexibility, with interest charged on the amount utilised. Compare the repayment terms and applicable charges before choosing a loan.


  • Term Loan: Suitable for a single, planned expense.
  • Flexi Loan: Useful when funds are needed in stages.
  • Interest: Flexi Loans charge interest on the amount utilised rather than the entire sanctioned limit.
  • Charges: Fees and charges vary across loan variants.
  • Cost comparison: Monthly interest in the illustration is Rs. 1,750 on Rs. 1.5 lakh utilised, compared with Rs. 4,667 on a Rs. 4 lakh Term Loan.

Need funds in stages? Check your loan offer with your phone number and a one-time password (OTP) → apply online → funds may be credited within 24 hours* of approval, subject to verification.

What sets a personal loan apart from a line of credit?

The table compares the 2 ways to borrow.


PointPersonal loan (Term Loan)Line of credit
How you get the moneyThe full amount at onceDraw any amount, at any time, up to a limit
InterestOn the full amountOn the amount you use
RepaymentFixed EMIs over a set tenureVaries with what you draw; terms depend on the product
SuitsOne known costCosts that come in stages or are hard to predict

Last updated: 4th November, 2026

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What is a personal loan?

A personal loan gives you a fixed amount in your bank account at once. You repay it in equal EMIs over a set tenure. The EMI covers both principal and interest, so you know the full cost from day one.


A Bajaj Finance Personal Loan offers Rs. 40,000 to Rs. 75 lakh over 12 months to 108 months, with no collateral.

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What is a line of credit?

A line of credit is an approved limit you can draw from. You take money when you need it and pay interest only on what you have drawn. As you repay, the limit opens up again on most products.


Because you draw in parts, this keeps interest down when you do not need all the money at once.

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How do Flexi Loans compare with a line of credit?

Bajaj Finance offers 2 Flexi variants that work in a similar way to a line of credit:

  • Flexi Dropline Loan: You get a limit and can make multiple withdrawals without a fresh application. Interest is charged on the amount used. The limit drops each month as per the schedule. Part-prepayment has no extra charge.
  • Flexi Hybrid Loan: It works like the Dropline, and an interest-only EMI may apply for the first 36 months, followed by principal-and-interest EMIs.

Unlike a revolving line of credit, the Flexi limit follows a set schedule over the tenure. Annual maintenance charges apply. Check the Key Fact Statement for the charges on your variant.

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Which one suits your needs?

  • One bill, known in advance: A Term Loan. Fixed EMIs make the cost clear.
  • A project paid in stages: A Flexi Loan or a line of credit, so interest applies only to what you draw.
  • An expense you are unsure about: A Flexi Loan lets you borrow less if the cost turns out lower.
  • A plan to repay early: You can part-prepay a Flexi Loan at no extra charge, while a Term Loan may carry pre-payment charges.

Arvind's staged renovation

Arvind, 45, is a salaried plant manager at an engineering firm in Chennai. His pay is Rs. 95,000 monthly, and his CIBIL report shows 779. He planned to redo his house over 6 months: Rs. 1.5 lakh for the roof first, then Rs. 1.5 lakh for flooring and Rs. 1 lakh for painting. A line of credit seemed a natural fit, so he checked his options. He priced a Term Loan of Rs. 4 lakh at an illustrative 14% per annum, then compared it with drawing in stages.


EMI = P × R × (1 + R)^N ÷ [(1 + R)^N − 1]. Here P = Rs. 4,00,000, R = 14 ÷ 1,200 and N = months.


TenureMonthly EMI (Rs.)Total interest (Rs.)EMI as share of salary (%)
24 months (2 years)19,20560,92420.2
36 months (3 years)13,67192,15814.4


Last updated: 4th November, 2026


With a Term Loan, interest starts on the full Rs. 4 lakh from the first month, about Rs. 4,667. With a Flexi limit at the same illustrative rate, drawing only Rs. 1.5 lakh for the roof means interest of about Rs. 1,750 in that month. Processing on Rs. 4 lakh can cost up to Rs. 16,520. Arvind chose a Flexi Dropline Loan, as his costs came in stages, much like a line of credit.


What can delay approval: a CIBIL score below 650 or existing EMIs that take up a large share of your income. Names or addresses that do not match across documents, and more than one loan application in the same month, can also slow it down.


Comparing a personal loan with a line of credit? With a Bajaj Finance Personal Loan, you can borrow Rs. 40,000 to Rs. 75 lakh, subject to eligibility. Check your loan offer with your phone number and a one-time password (OTP) → apply online → funds may be credited within 24 hours* of approval, subject to verification.

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What should you check before you choose?

  • The interest rate: A Bajaj Finance Personal Loan ranges from 10% to 30.5% per annum, based on your profile.
  • The processing fee: Up to 4.13% of the amount borrowed, inclusive of applicable taxes.
  • Flexi charges: Annual maintenance charges apply to Flexi variants; compare them with any line of credit fee you are quoted.
  • Early closure: A Term Loan may carry pre-payment charges.

Your Key Fact Statement lists every charge; read it first.

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Can a Bajaj Finance Personal Loan meet a staged need?

A Bajaj Finance Personal Loan comes as a Term Loan, a Flexi Dropline Loan or a Flexi Hybrid Loan. It is open to Indian nationals aged 21 years to 80 years with a CIBIL score of 650 or higher. If you would otherwise look for a line of credit, compare the Flexi variants first.

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Key offerings: 3 loan types

  • Flexi Hybrid Loan
  • Flexi Dropline Loan
  • Term Loan

  • Withdraw and prepay – no extra charges
    You can withdraw from your limit and prepay as many times as you want, without extra charges.

  • Instalment pattern
    You can pay interest-only EMIs for up to 36 months, after which, the EMI will consist of both, the principal and the interest. EMI is applicable only on the withdrawn amount.

  • Flexi facility charges
    Flexi facility charges applicable based on your loan amount.

  • Withdraw and prepay – no extra charges
    You can withdraw from your limit and prepay as many times as you want, without extra charges.

  • Instalment pattern
    Fixed EMIs that cover both the principal and interest on the loan amount you withdraw.

  • Flexi facility charges
    Flexi facility charges applicable based on your loan amount.

  • Amount disbursed in one go
    The entire loan amount is disbursed at the start.

  • Instalment pattern
    Fixed EMIs that cover both the principal and interest.

  • Flexi facility charges
    No Flexi facility charges.

Personal loan interest rate and applicable charges

Type of fee

Applicable charges

Rate of interest per annum

10% to 30.5% p.a.

Processing fees

Up to 4.13% of the loan amount (inclusive of applicable taxes).

Flexi Facility Charge

Term Loan – Not applicable

Flexi Loans –Up To Rs 1,999 To Up To Rs 18,999/- (Inclusive Of Applicable Taxes)

Will be deducted upfront from loan amount.

Bounce charges

Rs. 700 to Rs. 1,200/- per bounce

“Bounce charges” shall mean charges for (i) dishonor of any payment instrument; or (ii) non-payment of instalment (s) on their respective due dates due to dishonor of payment mandate or non-registration of the payment mandate or any other reason.

Part-prepayment charges

Full Pre-payment:

  • Term Loan: Up to 4.72% (Inclusive of applicable taxes) on the outstanding loan amount as on the date of full pre-payment

  • Flexi Term (Dropline) Loan: Up to 4.72% (Inclusive of applicable taxes) on the outstanding loan amount, as on the date of full prepayment.

  • Flexi Hybrid Term Loan: Up to 4.72% (Inclusive of applicable taxes) on the outstanding loan amount, as on the date of full prepayment.

Part Pre-payment

  • Up to 4.72% (Inclusive of applicable taxes) of the principal amount of Loan prepaid on the date of such part Pre-Payment.

  • Not Applicable for Flexi Term (Dropline) Loan and Flexi Hybrid Term Loan.

Penal charge

Delay in payment of instalment(s) shall attract Penal Charge at the rate of up to 36% per annum per instalment from the respective due date until the date of receipt of the full instalment(s) amount.

Stamp duty (as per respective state)

Payable as per state laws and deducted upfront from loan amount.

Annual maintenance charges

Term Loan: Not applicable

Flexi Term (Dropline) Loan:

Up to 0.295% (Inclusive of applicable taxes) of the Dropline limit (as per the repayment schedule) on the date of levy of such charges.


Flexi Hybrid Term Loan:

Up to 0.472% (Inclusive Of Applicable Taxes) Of The Dropline Limit During Initial Tenure. Up to 0.295% (Inclusive Of Applicable Taxes) Of Dropline Limit During Subsequent Tenure

Credit guarantee scheme feeUp to 1.18% p.a. (pro-rated daily till 31st March) (inclusive of all applicable taxes) of the loan amount
Credit guarantee scheme renewal feeUp to 1.18% p.a. (inclusive of all applicable taxes) on the outstanding loan amount as on April 01 of the subsequent Financial Year.
*Renewal Fee to be collected only for 3 subsequent financial years.
 
**If the Remaining Tenure is less than 12 months, the CG Fee in subsequent years shall be charged prorated.

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Frequently asked questions

The basics

Costs

Is a line of credit better than a personal loan?

Neither is better for every need. A personal loan suits when you know in advance, with fixed EMIs. A line of credit suits costs that come in stages, as interest applies only to the money drawn. Pick the one that matches how and when you will spend the money, and compare the charges in the Key Fact Statement.

Bajaj Finance does not offer a line of credit as a separate product. Its Flexi Dropline Loan and Flexi Hybrid Loan work similarly. As with a line of credit, you get a limit, can make multiple withdrawals without a fresh application, and pay interest on the amount used. The limit follows a set schedule over the tenure, and annual maintenance charges apply.

It depends on how you use it, as with any line of credit. If you draw the full amount at once and keep it, a Term Loan can cost less, as Flexi variants carry annual maintenance charges. If you draw in stages or repay early, a Flexi Loan can cost less, since interest is on the amount used. Compare both Key Fact Statements for your plan.

Both Flexi variants let you part-prepay at no extra charge. You can repay part of what you have drawn when you have spare money, which reduces your interest. Other charges, such as annual maintenance, still apply. On a Term Loan, pre-payment charges may apply. Check the terms of your variant.

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Bajaj Finance Limited has the sole and absolute discretion, without assigning any reason to accept or reject any application. Terms and conditions apply*.
For customer support, call Personal Loan IVR: 7757 000 000