Short Term Loans

What is a line of credit and how does it work?

A loan, a credit card, or a line of credit—if you’re wondering what lending option could be for you, you are at the right place. In this article, we’ll discuss everything you need to know about a line of credit in Australia, its many pros and cons, and how it compares against other available lending options.

Table of Contents:

What is a line of credit and how does it work

A line of credit provides you access to a certain sum of money that you can borrow from when you need it. You can keep borrowing any amount as often as you require until you reach the preset credit limit. The line of credit replenishes as you repay the previously borrowed sum and it can be reused when required.

Therefore, a line of credit can help you manage your cash flow efficiently to meet various expenses. A line of credit can also come in handy if you’re not sure of how much funds you might need now, and want access to more funds at a later date without needing to re-apply for credit.

Credit24: Get a personal line of credit

When do I need a line of credit?

A line of credit can be valuable in situations that require flexibility. People may consider a line of credit when they have to meet unexpected expenses or have immediate financial needs with unclear cost requirements. For example, it can help you pay urgent medical bills or car maintenance expenses.

When you’re not sure about the final expense, a fixed loan and a repayment schedule may not be the best solution for your problems. In these cases, you can use a line of credit and repay the money immediately or over time at your convenience.

When to choose a line of credit?

Whether a line of credit is the best solution for you depends highly on your individual needs and circumstances. On one hand, it offers flexibility by allowing you access to funds when you need it without a fixed sum or repayment schedule. But it comes with the added risk of overspending and accumulating debt.

Pros and Cons

Line of Credit Pros and Cons
Pros Cons
Provides access to funds when you need it – draw as much or as little as you need, up to your credit limit. Easy access to funds may lead to impulsive purchases or unnecessary borrowings.
Offers ease of convenience as it provides immediate access to funds 24/7. Variable interest rates can lead to uncertain interest repayments.
It can be cost-effective since interest is only charged on the borrowed amount. It involves the risk of debt accumulation.
It caters to versatile needs, e.g., covering unexpected expenses. Might include annual fees or transaction fees adding to the overall cost of borrowing.
No collateral is needed for an unsecured line of credit. Applying for and getting a line of credit can affect credit score.¹

Common types of line of credit in Australia

There are multiple options of line of credit you can choose from. Here are the most common ones:

Personal line of credit:

A personal line of credit (PLOC) is a flexible credit with a variable rate of interest. With a PLOC, you can get a credit limit up to a specific amount. Under this, you can spend money on an as-needed basis where the interest is charged only on what you borrow.

Home equity line of equity:

HELOC is a line of credit that uses your house as collateral and provides you with borrowed funds against the available equity in the house.² It is typically used for large expenses or consolidating other higher-interest debts.

Business line of credit:

A business line of credit is a flexible loan for businesses that allows them to borrow money. This provides them access to funds and the flexibility to meet business expenses.

Demand line of credit:

A demand line of credit allows the borrower to borrow on a daily or on-demand basis.³ Simultaneously, it allows the lender to call the outstanding borrowed amount at any time.

Unsecured line of credit vs secured credit line

Now that you’re aware of the most common types of lines of credit, let’s look at some other classifications of this lending option. Lines of credit can be secured and unsecured. The secured credit line is secured against your asset allowing you to get a higher borrowing limit and lower rate of interest.⁴

Whereas, the unsecured line of credit does not require any collateral but is subject to a higher interest rate. An unsecured line of credit is processed and approved faster with less paperwork, whereas a secured line of credit can take longer to get approved.

For example, if you need urgent funds for house renovations, you can have access to immediate funds with an unsecured line of credit. It is also a good option for ongoing expenses like medical bills. Secured lines of credit are preferred for planned costs like business expenses.

Get an unsecured line of credit now

Revolving and non-revolving lines of credit

Other classifications of lines of credit include revolving and non-revolving lines of credit. A revolving line of credit is a credit that can be used more than once, e.g., a personal line of credit, HELOC, etc.⁵ It allows the borrower to continuously borrow credit up to a set credit limit. Whereas non-revolving lines of credit are similar to a standard loan. Under this, the borrower can borrow a lump sum amount which they have to pay back on a pre-decided date.⁶ Examples of non-revolving lines of credit include auto loans, student loans, etc.

Line of credit interest rates: how they work

A line of credit has a variable rate of interest, unlike fixed-term loans that usually have a fixed rate to ensure predictability of repayment on the loan.⁷ Therefore, it may be difficult to know the repayment amount in case of a line of credit.

Interest is charged as soon as the money is borrowed. You can either repay the line of credit immediately after borrowing or pay over time in regular minimum installments. Once the borrower pays back the borrowed fund, the money is replenished and can be borrowed again.

How does a line of credit compare to other types of loans?

Line of Credit vs Personal Loan

Even though lines of credit and personal loans have similar purposes, they differ in terms of the way they function. A personal loan is given as a lump sum amount for a fixed monthly payment of the principal and interest amount whereas a line of credit provides ongoing access to the preset borrowing fund at a variable rate.⁸

The question here arises, is it harder to get a loan or a line of credit? It largely depends on your current financial situation. If you do not have a great credit score, it may be easier for you to obtain a line of credit compared to a personal loan.

Line of Credit vs Credit Card

The biggest difference between a line of credit and a credit card is that lines of credit do not require you to make regular monthly payments. But unlike a line of credit, if you make your monthly payments on a credit card regularly, you may not have to pay any interest at all.

Lines of credit typically have a higher credit limit than credit cards, so you can have access to more funds at any given time. Most credit cards come with a variety of rewards and cash-back benefits which are not available in lines of credit.

Line of Credit vs Payday Loan

A payday loan is a borrowed sum of money from the lender for a short period that is repaid on the next payday. The main difference between a line of credit and payday loans is the borrowing fee. Payday loans can have a high establishment cost of 20% along with a 4% monthly fee, taking the APR up to 48%.⁹

How to apply for an online and instant line of credit?

Depending on your financial needs, you can approach banks and other lenders for a line of credit. However, you may have to jump through hoops and face delays in obtaining the loan. Credit24 provides flexible options to obtain a line of credit in Australia while making the entire process extremely convenient. It allows you to get a line of credit from $500 to $10,000 and you can receive the money almost instantly if your credit line online application is approved.

How do you get a credit with Credit24?

  1. To apply for a line of credit, click on ‘Start Application
  2. Keep your ID handy, along with login details to your main bank to upload three months of bank statements.
  3. Complete a quick and easy online line of credit application which should take less than 10 minutes.
  4. We’ll assess your eligibility. If you pass Credit24 credit checks, you’ll be presented with the maximum line of credit amount.
  5. Choose the amount you want to borrow, and submit your application for final assessment.
  6. If your quick loan request is approved, you’ll receive the money instantly.
  7. You can withdraw money from your line of credit anytime.

Benefits of a line of credit with Credit24

There are various benefits of getting a line of credit with Credit24. Here’s why Credit24 is one of the best line of credit loans in Australia:

  • You’ll have a virtual credit account with a credit limit between $500 and $10,000.
  • The entire process is online.
  • If your online line of credit application is approved, you can receive the money within 60 seconds*.
  • You only pay interest on the amount you use from your unsecured line of credit.
  • You have up to 36 months to pay back your line of credit and if you pay faster, you save on interest.

Credit24: Apply for a line of credit online

Line of credit – Frequently Asked Questions

Line of Credit FAQ
Can I turn my mortgage into a line of credit?

Yes, you can turn your mortgage into a home equity line of credit (HELOC). Once the mortgage is converted into a HELOC, you can make payments to your HELOC instead of your mortgage to pay off the entire or a part of your remaining mortgage balance.

Is it hard to get approved for a line of credit?

To get a line of credit, you must meet certain eligibility criteria. For a Credit24 credit line, you should be an Australian citizen or permanent resident and over 18 years of age. You should be employed with a reasonable credit history and have a minimum monthly earning of $1,000.

Will banks give you a line of credit?

Banks can have an overly cautious approach and strict eligibility criteria that make it difficult to get a line of credit. Even if you are eligible for a line of credit, banks may take days or even months to complete the process and you may not be able to receive the funds immediately.

How much can I get a line of credit for?

It is possible to get a line of credit in Australia of up to $10,000 from Credit24. But the amount you can receive will depend on your financial situation. Once you finish the online line of credit application, we will assess your income and expenses to come up with a credit limit that you can afford to repay.

What is the minimum monthly payment on a line of credit?

Your minimum payment depends on a lot of factors, including how much you borrow, term of the repayment, your repayment schedule (weekly, fornightly, or monthly). You can get a rough estimate of your possible monthly payments through our line of credit calculator.

PF Digital Australia Pty Ltd, trading as Credit24, ABN 59 130 894 405. Australian Credit Licence 422839. The information in this article is of general nature and does not take into consideration your objectives, financial situation or needs. Lending criteria, fees and charges apply. For more information about our products, eligibility criteria and terms and conditions, please visit


  1. Innovation Federal Credit Union: Should I Accept a Line of Credit? The Do’s and Don’ts
  2. Bank of America: What is a home equity line of credit (HELOC)?
  3. NASDAQ: Demand line of credit
  4. Canadian Imperial Bank of Commerce: Secured vs. Unsecured Loans
  5. CNET: What’s the Difference Between Revolving and Non-Revolving Credit?
  6. Investopedia: Lines of Credit: When to Use Them and When to Avoid Them
  7. Westpac: What Is A Line Of Credit And How Does It Work?
  8. Finder AU: Payday loans Australia
  9. *Money paid out within 60 seconds of loans being approved or a withdraw made on a Line of Credit to PayID enabled banks.