Line of Credit Calculator
Estimate monthly interest charges and payoff time on a HELOC, personal LOC, or business LOC. Interest is calculated daily on the outstanding balance, what you draw and don't repay quickly accrues compound interest.
Reviewed & updated for 2026 by Rakesh Choudhary, PhD · How we calculate
Types of lines of credit
| Type | APR range | Limit | Collateral |
|---|---|---|---|
| HELOC | 7-10% | Up to 85% LTV | Your home |
| Personal LOC (unsecured) | 10-18% | 5K-50K | None |
| Business LOC | 8-16% | 10K-1M | Business assets |
| Credit card | 18-29% | 1K-100K | None |
| Securities-based LOC | SOFR + 2-4% | 50-70% of portfolio | Brokerage account |
Variable rates tied to prime rate (currently ~7.5%) or SOFR. Fixed-rate options exist on some products at higher initial rates.
Tips for managing a line of credit
- Pay more than interest-only: Minimum interest-only payments mean you're paying for the privilege of borrowing without making any progress on the principal.
- Watch for the draw-to-repayment shift: At year 10 of a HELOC, monthly payments can spike 2-3x as principal repayment kicks in.
- Use only for short-term needs or appreciating assets: Home improvement that increases value is wise. Vacation or consumer goods is risky, you'll pay interest long after the value is gone.
- Don't max out the credit limit: Utilization above 30% hurts your credit score even on a HELOC.
When a line of credit beats a personal loan
Personal loans are simpler — you borrow a fixed amount, make fixed payments, and you're done. Lines of credit are more flexible but more complicated. Each tool has the upper hand in specific situations.
Choose a line of credit when:
- You don't know exactly how much you'll need. Home renovations, medical procedures with uncertain costs, or business cash-flow gaps fit this pattern.
- You need access over time, not all at once. A HELOC during a multi-year renovation lets you draw as contractors invoice instead of paying interest on funds you haven't used.
- The need might recur. A small-business owner who handles seasonal payroll dips would rather have a $50,000 LOC available than apply for a new loan twice a year.
- You have an emergency fund alternative. A personal LOC sitting unused can replace the "keep 6 months of expenses in cash" rule for some risk-tolerant savers, though only if you have the discipline not to draw on it casually.
Choose a personal loan when:
- You know the exact amount needed. Debt consolidation at a known balance, a one-time car repair, or wedding expenses all benefit from fixed terms.
- You want predictable payments. Lines of credit have variable rates and minimum payments that change. A fixed-rate personal loan is the same payment every month for the full term.
- Discipline is a concern. With a closed-end loan, you can't accidentally re-borrow against the same balance. With a line of credit, the temptation never goes away until you close the account.
A common hybrid strategy: use a personal loan for the known portion of an expense and keep a line of credit available for overruns. This caps your committed debt but preserves flexibility.
FAQs
What is a line of credit?
A line of credit (LOC) is a flexible loan where you borrow up to a maximum credit limit, paying interest only on what you actually use. Unlike a term loan (fixed payment, fixed amount), an LOC lets you draw, repay, and re-draw funds during the draw period. Common types: HELOC (home equity), personal LOC (unsecured), business LOC, credit cards.
How is interest calculated on a line of credit?
Interest accrues daily on the outstanding balance. The formula: outstanding balance times APR divided by 365 = daily interest. At month end (or billing cycle), interest charges are added to the balance. Most LOCs require interest-only minimum payments during the draw period, then convert to principal + interest during the repayment period.
What is the difference between a HELOC and a personal line of credit?
HELOC (Home Equity Line of Credit) is SECURED by your home. Lower rates (typically prime + 0-2%, currently 7-9%), tax-deductible interest in some cases, higher credit limits (up to 85% LTV). Personal LOC is UNSECURED. Higher rates (10-21%), lower limits (5K-50K typically), faster approval, no risk to your home if you default.
What is a typical HELOC interest rate?
HELOCs use variable rates tied to the prime rate (currently 7.5% as of 2026). Most HELOCs are prime + 0.5% to + 2.5%, putting current rates in the 8-10% range. Some lenders offer introductory rates as low as 5.99% for 6-12 months. Rates can change monthly based on Federal Reserve actions.
How long is a HELOC draw period?
Standard HELOC has a 10-year draw period (when you can borrow), followed by a 20-year repayment period (no more borrowing, must pay down balance). During draw, you can make interest-only payments. During repayment, you must pay principal + interest on the outstanding balance.
Are line of credit payments tax deductible?
HELOC interest can be deductible if the borrowed funds are used to buy, build, or substantially improve the home that secures the loan. Personal LOC interest is generally NOT deductible. Business LOC interest is deductible as a business expense. Total mortgage + HELOC debt is capped at 750,000 dollars for the deduction (1 million for pre-2018 loans).
What is the minimum payment on a line of credit?
During the draw period, minimum payment is usually the accrued interest only (which keeps the balance flat). During the repayment period, minimum payment includes principal + interest amortized over the remaining term. Always pay more than the minimum to avoid being trapped in a perpetual interest cycle.