 TITLE: What is a Line of Credit? CONTENT: How Lines of Credit Compare with Personal Loans and Credit Cards\n----------------------------------------------------------------\nThe most popular forms of unsecured loans available from financial institutions are lines of credit, personal loans and credit cards. Here's a look at their similarities and differences.\nHere are the main ways these forms of credit differ from one another:\n*   **Lump sum vs. credit line:** With a loan, the amount you borrow is delivered in a lump sum and you must start making monthly payments (including interest charges) immediately and continue for the duration of the loan—typically 24 to 60 months. With a LOC or credit card, you have access to a maximum amount of cash—your credit line or borrowing limit—but you don't pay interest or make payments until you use your credit.\n*   **Payment amounts:** A loan requires you to pay an identical amount every month for the life of the loan. With a credit line or credit card, you can pay back what you owe in payments of any amount at or above a specified monthly minimum. That means you can save on interest charges if you pay off your balance with a few large payments, or spread smaller payments out over a longer time span, and pay more in interest.\n*   **Cost:** It typically costs less to use than it does a credit card. Some personal lines of credit currently have interest rates of 8.25% to 15%. That compares to an average credit card interest rate of about 16.3% these days and average annual rates on two-year personal loans of 9.58%.\n*   **Getting cash:** It's much easier (and less costly) to get cash from a personal LOC or personal loan than from a credit card. With a personal loan, you receive a lump-sum cash payment, and with a personal credit line, you typically get a checkbook and a debit card you can use for purchases or cash withdrawals. Taking out a cash advance from a credit card can be much more expensive. Card issuers typically charge higher interest rates on cash advances than they do ordinary purchases, and many also charge additional fees on each cash advance.\n*   **Length of term:** You can keep a credit card account open indefinitely if you keep the card active and make payments as agreed, but loans and personal LOCs have fixed durations. END