A personal loan provides a sum of money up front, while a personal line of credit lets you borrow what you need on an ongoing basis, much like a credit card. Personal loans are typically better for substantial one-time expenses, like consolidating high-interest debt. A personal line of credit could be a better option for ongoing needs, such as a home renovation project or out-of-pocket medical expenses.
Here’s a closer look at personal loans and personal lines of credit so you can make an informed decision about the best type of financing for your needs.
Best for: A revolving line of credit, lower interest rates than credit cards, those with good-to-excellent credit
A personal line of credit is a set amount that you can borrow from whenever you need, as long as you don’t exceed the limit. Rates for personal lines of credit may be lower than credit card interest rates, but there’s no grace period — instead, interest begins accruing immediately.
Like credit cards, a personal line of credit typically has a variable interest rate that can fluctuate according to a benchmark index, such as the prime rate. And you’ll need to have excellent credit to qualify for the best rates. For example, Bank of America offers personal lines of credit to existing customers with variable rates as low as 12.5% APR, but you’ll need to have a FICO score of at least 800 to qualify for that rate.
After drawing from a line of credit, you make monthly payments with interest until you’ve repaid the balance. As you make payments, your credit line replenishes, and you can borrow from it again.
Note
A personal line of credit is generally a variable-rate loan, meaning interest rates may fluctuate over time, which can affect your monthly payments.
Some personal lines of credit come with a limited draw period during which you can withdraw funds, followed by a repayment period. For example, Fifth Third Bank offers an unsecured line of credit with a five-year draw period, followed by a 10-year repayment period. Others offer a continuous draw period. You may pay an annual fee to keep the line of credit open, and some lenders charge a transaction fee every time you withdraw funds.
Pros and cons of personal lines of credit
Pros
- Borrow repeatedly over several years without reapplying
- Replenish your limit with repayment
- May have lower interest rates and higher borrowing limits than credit cards
- Convenient access to funds through writing checks or using a linked payment card
Cons
- Possible maintenance and transaction fees
- May have variable interest rates and unpredictable monthly payments
- May be difficult to qualify for without good credit
Best for: Funding large purchases, one-time expenses, fixed monthly payments, most credit types
A personal loan is a type of installment loan. Instead of borrowing as needed from a credit line, you receive a lump sum of cash up front from a bank, credit union, or online lender. Personal loans also tend to have fixed interest rates. This means that payments are fixed as well, and won’t change according to a benchmark index. Personal loans may also charge fees, such as an origination fee, which the lender deducts from the loan proceeds.
Personal loans come with a choice of repayment terms — up to seven years is common. If you’re looking to finance home improvements, or other large purchases like a boat or RV, you may be able to repay the loan over 10 years or longer with lenders like BHG, LightStream, and Navy Federal. Depending on your credit and income, it may be possible to borrow up to $100,000 or more. Smaller amounts and shorter terms are also available.
You’ll qualify for the lowest rates if you have excellent credit, a low debt-to-income ratio, and a reliable source of income. But some lenders specialize in personal loans for fair credit and personal loans for bad credit, as well.
Tip
Compare annual percentage rates (APRs) between personal loan lenders to ensure the best cost for your budget. It is better practice to have an affordable monthly payment than a lower APR.
Pros and cons of personal loans
Pros
- Predictable, fixed monthly payment schedule
- May be available to borrowers with fair credit
- Maintenance and transaction fees are uncommon
Cons
- Must reapply for new credit if you need more money
- May have shorter repayment terms and higher monthly payments
- May require an origination fee, which is deducted from the funds you receive
How lines of credit and personal loans differ
Lines of credit allow you to borrow only what you need and to continue borrowing without reapplying, but be prepared for variable monthly payments. Personal loans, on the other hand, provide a large sum of money all at once, and typically require you to repay the loan in equal monthly payments over time.
Here are common differences between personal loans and personal lines of credit:
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| Draw period that may be continuous, with monthly minimums based on the amount borrowed; or a repayment period that follows a draw period | |
| Checks, payment cards, or bank transfer | |
| Ongoing spending needs, especially if you’re uncertain how much you’ll need in total | Emergency expenses, debt consolidation, one-time purchase, and people who like predictable monthly payments |
- You need to consolidate debt: If you pay off your credit card with a personal loan, you’ll be left with one monthly payment and, ideally, a lower interest rate. You’ll maximize your savings by using a lump sum to pay off the full balance.
- You’re making a large purchase: If you’re faced with a one-time expense, like replacing an appliance or paying for an auto repair, you can borrow the exact amount you need with a personal loan.
- You prefer predictable payments: Personal loans are typically repaid in fixed monthly installments, helping you budget and avoid missed payments.
- You’re working on a home improvement or renovation project: If you’re making significant updates to your home, such as adding a mother-in-law suite or making aging-in-place upgrades, a personal line of credit can help you pay as you go.
- You have ongoing medical bills: If you’re managing a health condition, you might be unsure of the total cost. A personal line of credit can help you pay the bills as they come.
- Your paydays don’t line up with your due dates: If you make inconsistent or seasonal income, a personal line of credit can help you pay your bills in the off-season at lower rates than a credit card. Ultimately, your goal should be to save for dips in income in advance, but a line of credit might help in the meantime.
- Your expenses will increase temporarily: If you’re moving and getting established, helping a relative, or taking a class, a personal line of credit might help you pay for your expenses until you can make room in your budget or get a new source of income.
A personal line of credit loan is the same as a personal line of credit. It’s an amount of money that you can borrow from repeatedly, up to your credit limit. As you make minimum monthly payments with interest on the amount you borrowed, your credit line will replenish. Personal lines of credit may come with lower interest rates than credit cards, but rates are variable and there may be other fees.
A personal loan is typically preferable for a one-time expense, while a line of credit may be advantageous if you’re not sure how much money you’ll need to borrow or if you’ll need to borrow repeatedly over time.
A line of credit allows you to access an amount of your choice up to your credit limit, and you only pay variable interest on the funds you use. Repayment replenishes your credit limit, and you can borrow again as needed. A personal loan, on the other hand, provides a lump sum of cash that you repay in fixed monthly installments.
Advertiser DisclosureOverview
Lightstream is one of three Credible partner lenders to offer loan amounts up to $100,000, which makes it ideal for financing large expenses like home improvements or weddings. Funds are available as soon as the same day you apply, and you'll have up to 12 years to repay certain types of loans, including home improvement loans, RV loans, and boat loans. There are no origination fees, and rates are low — Lightstream's lowest APR beats SoFi's advertised lowest APR by 1 percentage point. But you'll need good credit to qualify.
Unlike most lenders, Lightstream does not let you prequalify on its site. Nor does it provide a contact phone number next to its customer service hours on its website.
Repayment terms
2 - 12 years, depending on loan purpose
Eligibility
Available in all states except RI and VT
Time to get funds
As soon as the next business day
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Overview
Upstart has one of the lowest available APRs of Credible partner lenders and of all non-partners we reviewed, making it a good choice for well-qualified applicants. However, it's also is one of few lenders that doesn't have a minimum credit score requirement (if you apply on the lender's website), which makes it an option if you have bad credit or no credit history. Upstart may charge an origination fee as high as 12%, but good-credit borrowers may not be charged one at all.
Trustpilot gives Upstart 4.9 stars, which is the highest of all lenders we reviewed.
Time to get funds
As soon as 1 to 3 business days
Loan uses
Pay off credit cards, consolidate debt, relocate, make a large purchase, and other purposes
Overview
Discover Personal Loans offers low APRs, repayment terms up to seven years, no origination fees, nationwide availability, and doesn't require your Social Security number to prequalify on its site. You'll need to have an annual income of at least $40,000, and a FICO score 660 or higher, to be eligible. If your credit score is fair or poor, you'll need to go elsewhere, as Discover doesn't allow cosigners.
Funds are available as soon as the next business day after loan approval.
Eligibility
Available in all 50 states
Time to get funds
Funds can be sent as soon as the next business day after acceptance
Loan uses
Auto repair, credit card refinancing, debt consolidation, home remodel or repair, major purchase, medical expenses, taxes, vacation, and wedding
Overview
Upgrade has a suite of features that make it a very attractive lender: competitive interest rates, discounts for direct pay and autopay, as soon as same-day funding, up to seven-year repayment terms, and nationwide availability. Plus, loans are available to fair-credit borrowers, and you don't need to input your Social Security number to prequalify on the website. Upgrade even offers secured personal loans, which is not common among lenders.
However, Upgrade does charge an origination fee of 1.85% to 9.99%. You must have a FICO score of at least 600 and a minimum income of $25,000 annually to qualify.
Loan amount
$1,000 to $50,000 ($3,005 minimum in GA; $6,600 minimum in MA)
Loan uses
Credit card refinancing, debt consolidation, home improvement, major purchase, other
Overview
LendingClub is a solid lender for good credit borrowers and some fair credit borrowers that apply directly on its website. It's easy to prequalify with LendingClub, especially if you're uncomfortable providing your Social Security number, as the company doesn't require it at the prequalification stage. (You will need to provide it if you move forward with a full application.)
While prequalification is not a guarantee that you'll be approved for a loan, LendingClub does a better job than most other Credible partner lenders at approving applicants that have successfully prequalified. In other words, you're less likely to have your application declined once you apply (if you've already prequalified). LendingClub may charge an origination fee between 3% and 8%.
Eligibility
Available in all 50 states
Loan uses
Debt consolidation, paying off credit cards
Overview
SoFi stands out for offering no-fee personal loans with competitive rates, high loan amounts, long loan terms, discounts for autopay and direct pay, and funding as soon as the same day. Plus, SoFi prioritizes convenience for existing and potential customers with features like live chat and an easy prequalification process that doesn't require your Social Security number.
The main catch is that you need to qualify for a loan with SoFi, which can be hard to do if you don't have good credit. You also won't be able to apply with a cosigner, since SoFi doesn't accept cosigners; nor does it offer secured personal loans.
Fees
Option to pay an origination fee (up to 6%) in exchange for a lower rate
Time to get funds
Typically within a few days, given approval and bank account verification, but sometimes within the same day
Loan uses
Solely for personal, family, or household uses
Overview
Best Egg is a solid lender for a wide range of borrowers and, notably, scored second for personal loan satisfaction in J.D. Power's Consumer Lending Study. It offers competitive rates, reasonable loan terms and amounts, and personal loans for fair credit. You'll need a FICO score of at least 600 to qualify, but the lower your score, the higher your APR may be. The APR includes the interest rate and origination fees, which range from 0.99% to 8.99% with Best Egg.
Note that if you successfully prequalify with Best Egg, you may be more likely to be approved for the loan relative to other lenders you prequalify with. Based on Credible data, borrowers who chose to apply for a loan with Best Egg were more than twice as likely to be approved (relative to most other Credible partners).
Fees
Origination fee, late fee, unsuccessful payment fee, check processing fee
Eligibility
Available in all states except DC, IA, VT, and WV
Time to get funds
As soon as 1 to 3 business days after successful verification
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Overview
Avant personal loans are a good choice for borrowers with bad credit looking for small- to moderate-sized personal loans. Loans are available up to $35,000 and you could get the money as soon as the next business day after approval. Plus, Avant is more likely than some lenders to approve the applications of borrowers who've prequalified with Avant. However, the lender charges an origination fee up to 9.99%, and its top-range interest rates are among the highest of the lenders we reviewed.
Fees
Origination fee, late fee, dishonored payment fee
Eligibility
Available in all states except HI, IA, MA, ME, NY, VT, and WV
Time to get funds
As soon as the next business day (if approved by 4:30 p.m. CT on a weekday)
Loan uses
Debt consolidation, emergency expense, life event, home improvement, and other purposes
Repayment terms
1 to 5 years (2 to 5 years through Credible)
Overview
It’s worth considering a personal loan through Splash if you have good credit (ideally, a FICO score above 700). The platform offers loans from a wide range of lenders, and next-day funding is available. Plus, Splash has a live chat feature so you can get real-time answers without having to wait on hold or for an email. Loans are available up to $100,000 if you apply via Splash’s website.
Rates are competitive, but borrowers with excellent credit may find lower APRs elsewhere. If you need a repayment term longer than five years, you’ll need to look elsewhere as well.
Loan amount
$5,000 - $100,000 (up to $35,000 on Credible)
Eligibility
Available in all states except VT. OH and NM net disbursed amount must be greater than $5,000. MA must be greater than $6,000
Time to get funds
Same day available, typically 1-3 days
Loan uses
Debt consolidation, home improvement, medical expenses, major purchases
Overview
Universal Credit is one of a handful of lenders that offers personal loans for bad credit. If your FICO credit score is at least 560, you may be eligible for a Universal Credit personal loan. It offers loan amounts up to $50,000, repayment terms up to seven years, and discounts for direct pay and autopay. Funds are available as soon as the next business day after loan approval.
Note that rates and fees can be relatively high — you may pay an origination fee from 5.25% to 9.99%, and APRs start at 11.69%. If you get a loan with a high interest rate, consider refinancing your personal loan at a lower rate once you've improved your credit score.
Eligibility
A U.S. citizen or permanent resident; not available in DC, IA, SC, WV
Time to get funds
As soon as 1 business day after acceptance
Loan uses
Debt consolidation, pay off credit cards, home improvements, unexpected expenses, home and auto repairs, weddings, and other major purchases
Overview
Happy Money has been in operation since 2009 (formerly known as Payoff). It's an option for fair-credit borrowers (plus those with better credit), and notably has a relatively low top-end APR. In other words, you could qualify for a lower rate with Happy Money with fair credit, relative to other lenders that offer fair-credit loans. The company does charge an origination fee on some loans, up to 5%, but that's not as high as some other lenders' origination fees.
You should be prepared to wait a few days to get your money, as funding can take three to five days once approved. And loans aren't available in Massachusetts or Nevada. Happy Money has an A+ rating with the BBB and is ideal for debt consolidation and credit card consolidation loans.
Eligibility
Available in all states except MA, MS, NV, and OH
Time to get funds
As soon as 2 - 5 business days after verification
Loan uses
Debt consolidation and credit card consolidation only
Overview
BHG Money stands out for offering the largest loan amounts — up to $200,000 — of any Credible partner lenders. Simply put, if you need an unsecured personal loan over $100,000, there are very few places to look, but BHG is one. You'll have up to 10 years to repay the loan, but you'll need an annual income of at least $100,000 to qualify and a FICO score that's 660 or higher. However, if you have a cosigner that meets these requirements, BHG will consider your application.
Loan amounts start at $20,000, so look elsewhere for small loans. And BHG charges a modest origination fee between 2% and 4%, depending on your financial profile. Loan funds are available within three to 14 days of loan approval. Note that you can't prequalify with BHG.
Fees
Origination fees, late fees
Eligibility
Available in all states except Maryland and Illinois
Loan uses
Debt consolidation, baby (adoption), engagement ring financing, moving (relocation), business, home improvement, special occasion, cosmetic procedures, major purchase, taxes, credit card refinancing, medical expenses, vacation, wedding, other
Fees
Origination Fee, $15 Late Fee, $25 NSF Fee
Eligibility
Available in all states except CO, CT, ME, NV, NH, TN, VT, WV, WY, and all U.S. Territories
Time to get funds
Funds typically deposited into your account in 1 business day13
Loan uses
Debt consolidation, credit card refinancing
Overview
OneMain Financial has multiple options for bad-credit personal loans. There is no minimum credit score required (if you apply directly with OneMain), which means you could get a loan with bad credit (FICO below 580). Plus, cosigners are allowed — a cosigner is someone (ideally, with good credit) who promises to repay the loan if you can't, which can make it easier to qualify or lower your rate. And, secured personal loans are available. You secure a loan with collateral, which may also help you qualify or lower your rate.
Rates are higher than competitors and OneMain charges origination fees as either a flat fee up to $500, or a percentage from 1% to 10% (depending on your state of residence). Note that even if you prequalify for a personal loan with OneMain, getting approved isn't a given.
Fees
Origination fee, unsuccessful payment fee, late fee
Eligibility
Must have photo I.D. issued by U.S. federal, state or local government
Time to get funds
As soon as 1 to 2 days after acceptance
Loan use
All except business, and education
Fox Business does not make or arrange loans.
Meet the contributor:
Lindsay Frankel
Lindsay Frankel has been covering personal finance for six years, with particular expertise in loans, insurance, and real estate. She’s written hundreds of articles across a range of well-known outlets, including LendingTree, Investopedia, SFGate, and more. Outside of writing, she enjoys playing music and exploring nature with her rescue dog, Lucy.