What is a personal line of credit?
What is a personal line of credit?

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Wells Fargo began notifying consumers this week that they would be phasing out their personal line of credit product. In letters reviewed by CNBC, the bank said it was focused on credit cards and personal loans.

They also said that for consumers who currently have a personal line of credit open with the bank, their credit rating may be affected when the product is terminated. This short notice has offended consumers and critics of the banking industry.

But what exactly is a personal line of credit? Select walks you through what you need to know about the product, including pros and cons, and what to know when applying so you can choose the one that best suits your needs.

What is a personal line of credit?

A personal line of credit, sometimes abbreviated as PLOC, is a fixed amount of credit made available to you by a financial institution over a set period of time. Many consumers use a personal line of credit to consolidate debt, grow their business, pay medical bills, refinance existing debt, renovate their homes and more.

A personal line of credit is sort of a cross between a credit card and a personal loan. However, there are a few distinguishing features:

Advantages and disadvantages of a personal line of credit

There are several use cases where a personal line of credit makes sense, while in other scenarios it might not. As with any personal financial decision, it pays to explore all of your options.


A personal line of credit is a great way to access capital. However, each lender may restrict the use of your funds, so be sure to check the lender’s terms. Here are some benefits of using a personal line of credit:

The inconvenients

A personal line of credit is a different type of loan product with several unique advantages, but there are also some disadvantages to keep in mind:

  • The risk of unsecured loans: A personal line of credit is considered an unsecured loan because no collateral is taken by the lender. This usually results in higher interest rates since the financial institution bears all the risk.
  • High credit score required: Since the loan is unsecured and in some cases the line of credit can amount to hundreds of thousands of dollars, a credit score of over 700 is generally required.

Alternatives to a personal line of credit

How to qualify for a personal line of credit

Banks that offer personal lines of credit

Although Wells Fargo has eliminated the personal line of credit product, many banks still offer the same thing. Each institution offers different loan amounts, terms, and fees, so be sure to compare institutions to find the best one for you.

At the end of the line

A personal line of credit can be used as a strategic tool for managing debt, growing a business or renovating a home. Although Wells Fargo has eliminated the product from its offerings, several other banks still offer it. And with the right interest rate and terms, a personal line of credit could be a useful resource for you in your financial endeavors.

Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.


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