A personal line of credit offers a flexible borrowing tool with a set credit limit that can be drawn from as needed. However, rates often range from 10 to 20% APR with potential annual fees. Personal lines of credit typically have higher interest rates than secured loans like mortgages. These credit lines usually have two phases: a draw period and a repayment period. Lenders consider creditworthiness and factors like income and debt-to-income ratio when approving applications. Personal lines of credit are best for unpredictable expenses, but they should not be used to supplement a consistently underwater budget.

Personal lines of credit can affect credit scores through hard inquiries, credit utilization, and payment history. Understanding repayment terms and comparing with other options like credit cards, HELOCs, and personal loans is crucial before accepting an offer. Personal loans provide a lump sum upfront with predictable payments, while a personal line of credit acts more like a credit card with variable APRs. Depending on your borrowing needs and preferences, one option may be more suitable than the other.

Read more at Yahoo Finance: What is a personal line of credit? How borrowing, interest, and repayment work.