Installment loans and lines of credit are two popular loans. They may seem the same because payments are made on each in monthly installments, but they are quite different.

What’s The Difference?

With an installment loan you get all the money up front. With a lone of credit you use the money as needed on a rotating basis with a credit limit.

With the installment loan you will start paying interest on the full amount you have been given from the moment you start the agreement. So, if you get $300 you will pay interest on the whole $300 from day 1.

With a line of credit you only pay interest on what you use. So, if you get a line of credit for $300, but only use $50 of that then you will pay interest on only $50 of it.

As you can see these are two very different money lending options. Choose the one you want carefully. Consider how each works and choose the one that meets your needs the best.

Responsible use of credit can benefit your life and your finances but careless credit use can destroy your finances and hamper your future.