Personal Loan vs. Line of Credit: What’s Better for Managing Liquidity?

High income doesn’t always mean high cash flow

High earners often face unique liquidity challenges despite substantial incomes. Life events (expected and unexpected), large tax obligations, student loan debt from advanced degrees, and business investments often require significant upfront funds and can drain liquidity fast. If any of these expenses overlap, even a six- or seven-figure income can feel like living paycheck to paycheck.

Why liquidity matters—especially for professionals and business owners

Maintaining liquidity is essential for stability. It allows you to handle any curveballs life may throw at you (exclude examples) without resorting to costly credit cards or short-term loans.

Having access to liquidity also helps protect your credit profile and keeps future financing affordable. With more financial breathing room in your budget, you can avoid late payments, high credit utilization spikes, and reactive borrowing.

A personal loan is a type of installment loan that provides a one-time lump sum, which you repay over a set period through fixed monthly payments. Most personal loans are unsecured (requiring no collateral), carry a fixed interest rate, and have a predictable payoff schedule.

Key features:

• Fixed interest rate: Your rate is set at closing, so payments don’t change with the markets.
• Lump-sum disbursement: You receive the full approved amount upfront.
• Fixed monthly payments: Your payment amount is consistent, making it easier to budget.
• Typically unsecured: You don't have to put up assets like your home or car to secure the loan. Approval for unsecured loans is based entirely on credit, income strength, and overall profile.
• Faster approval: Without the need to appraise collateral, the approval process can be quicker and less complicated.

When a personal loan makes sense:

• Large one-time expenses: If you have a significant, singular expense like a large purchase, medical bills, or major home renovation, a personal loan provides the exact funds needed. Loan amounts are often higher than what you could get with a line of credit.
• Debt consolidation: Consolidating high-interest debts, such as credit card balances or other loans, into a single personal loan with a lower interest rate can simplify payments and reduce overall interest paid.
• Budget predictability: The fixed interest rate and monthly payments offer stability, making it easy to plan your finances without worrying about fluctuating costs.

FYI: BHG Financial personal loans are tailored for high earners with good credit. We offer fast approval decisions,¹ no personal collateral, and large loan amounts up to $250,000.²

A line of credit is a flexible borrowing option that lets you borrow as needed, up to a limit, and pay interest only on what you use. As you repay, funds become available again, making the line of credit a useful tool if your financial needs change over time.

Key features:

• Revolving credit: Unlike a lump-sum personal loan, a line of credit lets you borrow, repay, and re-borrow funds repeatedly as long as you stay within your credit limit.
• Variable interest rates: Many lines of credit keep pace with the prime rate, which means your rate can rise or fall based on market conditions.
• Pay-as-you-go borrowing: You only pay interest on the portion of the credit line you've drawn, not the entire approved amount.

When a line of credit makes sense:

• Irregular, ongoing expenses: If you have fluctuating expenses or need a continuous source of funds for various purposes, a line of credit (LOC) provides the flexibility to draw money as needed.
• Business-related liquidity needs: Business owners often use lines of credit to manage seasonal cash flow gaps, cover unexpected operational costs, or invest in short-term opportunities without taking out a new loan each time.
• Buffer for unexpected costs: An LOC can serve as a financial safety net, keeping capital available so you’re not forced into high-rate emergency borrowing.

Choosing between a personal loan and a line of credit depends on your financial situation and how you plan to use the funds. There's no one-size-fits-all answer, but considering your income stability, spending patterns, and the total cost of borrowing can help you make an informed decision.

Consider your income stability and spending patterns

Both financing types are a longer-term commitment, so you’ll need to consider your spending patterns and how you plan to repay the loan. If your expenses spike unpredictably—due to variable income streams or irregular expenses, for example—a line of credit keeps funds available when you need them. However, your minimum monthly payments will also vary based on the interest rate and amount withdrawn.

With a personal loan, you receive a fixed amount of money upfront, which you'll pay back with set payments each month until the loan is fully repaid. This can be beneficial for those with unpredictable incomes who prefer a defined path to becoming debt-free.

Consider the total cost of borrowing

Variable-rate lines can be cost-effective when rates are low and balances are small. But if rates rise or you carry a large balance over an extended period of time, the total interest can climb fast. Some lines of credit also levy fees for draws, inactivity, or annual renewal.

Fixed-rate personal loans provide a clear repayment schedule and promote disciplined repayment, but they may also come with origination fees, typically ranging from 1% to 8% of the loan amount.

When debt consolidation tips the scale

If you’re carrying high-interest revolving debt from month to month, a personal loan is likely a better solution than a line of credit. A personal loan for debt consolidation lets you roll several debts with varying rates into a single loan—likely at a reduced rate and a clear payoff date. Consolidation also reduces administrative friction: one payment, one lender, and a lower chance of missing due dates across accounts.

How BHG can help: A BHG personal loan—with high loan limits, extended terms,2 and fast approval decisions1—can consolidate scattered debts into a structured repayment plan that improves monthly cash flow.

Here’s an example of how much you could save each month with a personal loan based on a balance of $40,000:

High-income professionals often have unique financial profiles that traditional lenders may not fully understand. At BHG Financial, we understand that high income often comes with layered debt and growth-minded spending. That’s why we provide tailored financial solutions that acknowledge and support your success.

Here's why high earners choose BHG personal loans to manage liquidity:

• Loan amounts up to $250,000.² We offer significantly higher loan amounts than many other lenders, allowing you to handle several large obligations in one move.
• Terms up to 10 years.^2,3 Extending repayment can help protect your monthly cash flow, even for large loan amounts.
• No personal collateral required. Apply based on credit and income strength. You don't have to put your personal assets at risk to secure the financing you need.
• Approvals in as little as 24 hours¹ for qualified borrowers. Our streamlined application and approval process ensures you get access to funds quickly.
• Concierge lending experience. Work with loan experts who understand professional practices, tax timing, and multi-stream income. Our process is highly tailored and personalized, ensuring that we meet your specific financial goals with efficiency and discretion.

Personal loans and lines of credit are both smart solutions for managing liquidity. Ultimately, the right choice depends on how well each option fits your financial goals.

A personal loan offers fixed terms and clear repayment for those who value structure and predictability. But if flexibility and on-demand access are more important, a line of credit provides the freedom to borrow on demand and pay interest only on what you use.

Ready to discover what’s possible? See how a BHG personal loan could strengthen your liquidity strategy today—there’s no credit impact to view your offer and talk with a loan expert.⁴