Online Installment Loans vs. Revolving Credit

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Among many different loan products, revolving credit and online installment loans are two of the most popular. However, if you’re planning to apply for either of these loans, it’s essential to know the features of these two loan types. For sure, you can find crucial differences between an online installment loan and revolving credit.

When you obtain an online installment loan, your lender will provide you a fixed amount of loan that you have to repay with regular smaller payments (check this post to know more about installment loans).

On the other hand, revolving credit gives you access to a credit line from which you can take out money until you hit the borrowing limit. Of course, you only need to repay the amount you’ve drawn out from the credit line plus its interest.

Now, let’s dig deeper into the key differences between an online installment loan and a revolving credit.

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Revolving Credit vs. Online Installment Loans: Defined

Revolving Credit

Types of revolving debt include home equity lines of credits (HELOCs) and credit cards. With these credit types, you have a limited pool of money from which you can draw out as little or as much cash as you need until you reach the maximum limit.

For instance, you can initially take out $3,000 from a $7,000 HELOC. Once you pay the initial amount you’ve borrowed, you can borrow another amount in the line of credit again.

For an open-ended revolving credit, say, a credit card, the credit line stays open to you for an indefinite time. It enables you to obtain money from the line of credit and pay back the amount plus interest over and over. You can also find a credit line that’s only available for a definite period, such as ten years.

Opting for a revolving debt has risks, especially if you don’t pay attention to your borrowing behavior. It’s a must to calculate your liabilities and learn to pay back every time you obtain cash from the line of credit. Don’t let your borrowing behavior run amok to avoid repaying higher amounts of debt.

Online Installment Loans

Online lending companies sell installment loans to people who need money for sudden expenses or large purchases. House loans, car loans, and personal loans are typical types of installment loans.

Online installment loans can either have a fixed rate of interest or a variable interest rate. The former means that your interest rate stays the same throughout the loan’s term. On the other hand, a variable rate of interest means that your interest rate can change during the loan’s lifespan.

Of course, it’s advisable to choose an installment loan with a fixed interest rate because you know how much you have to repay, and you can budget your money ahead of the repayment schedule.

Difference Between the Two Loan Types When Accessing Funds

Online Installment Loans

The money you can take out after getting approved for an online installment loan is given to you in a lump sum. There’s no line of credit when it comes to installment loans. So, if ever you want to borrow more money, you need to apply for a new loan.

It’s crucial to determine precisely the amount you need to obtain to avoid taking out a new loan. In this way, you don’t have to pay too much interest that comes by having two or more loans at the same time.

Revolving Debt

One of the remarkable features of revolving credit is access to a line of credit. So, if you want more cash, you don’t have to apply for a new loan. You can take as much cash as you want from the credit line until you hit the maximum borrowing limit.

You can draw out cash from your line of credit immediately after opening a credit card. If you don’t need the money at the moment, you can wait for months or years before you get cash from the credit line. However, there are types of revolving credit that will be closed after years of inactivity.

Repayment Structure: Online Installment Loans vs. Revolving Credit

Revolving Credit

In a revolving credit, you only pay the amount that you’ve drawn out from the line of credit, along with its interest. There are bi-monthly, monthly, annual, or semi-annual payments for revolving credit.

Online Installment Loans

It’s easy to predict when to repay your installment loan because it’s pre-agreed between you and the lender. Typically, the loan amount plus interest of this loan type is repaid in smaller installment payments each month.


So, there you have it, the difference between online installment loans and revolving credit. If you often confuse these two popular loan types, consult this blog post to learn their key differences and give you an informed decision on what loan product you should obtain.

This article has been financially reviewed by Ben Heir, CFA

Last Updated on September 17, 2020 by Philip Horton


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Philip Horton

Philip Horton

Philip is the Head of Content for OnlineMoneyPage. He is responsible for researching and writing articles. He is also one of the co-founders of OnlineMoneyPage.

He is an experienced finance professional with a proven track record in the field of financial advisory. He has a proven history of success in clients’ personal finance planning. His core competencies include: Financial Planning & Analysis, Budgeting & Forecasting, Financial Modeling, Income Streams Improvement, and more.

Philip holds a MA degree in financial management and is a CFA and CFP charterholder.

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