Loan structure
A traditional instalment loan provides a defined principal amount and a repayment schedule. After funding, the borrower normally owes the disbursed principal, but repayments fall due according to the contractual schedule rather than all at once.
Line-of-credit structure
A line of credit establishes an approved borrowing limit. The borrower can draw funds up to that limit, repay them and, depending on the product, draw again. Interest is commonly based on the amount actually drawn rather than the full approved limit, although fees for an unused facility may still apply. For example, a 10,000-unit limit with a 2,000-unit draw does not itself create a 10,000-unit principal debt.
Predictability versus flexibility
A fixed loan can make the repayment path clearer because the amount and term are defined. A line of credit is more flexible but can make the outstanding balance and repayment period more variable.
Fees and access rules
Lines of credit can have account, facility or unused-limit fees in some products. Loans can have origination or establishment fees. Both can have eligibility limits and variable-rate structures.
Use the structure, not the label
Provider terminology differs across markets. Read how funds are advanced, how interest is calculated, whether repaid amounts become available again and whether a fixed end date applies.