In an ideal world, we’d all have enough income and savings to never have to borrow money. But in reality, only 24% of Americans have no debt, according to a 2016 survey by CreditCards.com. For the rest of us, consumer loans and lines of credit can help us finance necessary purchases we can’t afford on our own.
But countless lenders offer various consumer loans and lines of credit. That can make it hard to know which product is best for you. To help you decide, we’ll cover the difference between the two and some of the top options available.
The difference between consumer loans and lines of credit
Consumer loans are essentially any kind of loan you can take out as an individual, including mortgages, auto loans, student loans, and personal loans. They come with a set monthly payment and repayment term, and the account closes once you’ve repaid the debt.
Lines of credit, however, are a form of revolving credit, which means that you can borrow money up to your credit limit, pay it off, and then borrow again. A line of credit can be secured by collateral — such as in the case of a home equity line of credit — or unsecured, such as with a personal line of credit.
While consumer loans often give you a choice between a fixed and variable interest rate, lines of credit typically charge variable rates only.
To avoid making things too complicated, the only consumer loans we’ll cover in our roundup below are personal loans, which you can typically use for just about anything.
Also, while credit cards are a type of unsecured line of credit, we won’t cover them here. Instead, we’ll focus on personal lines of credit you can get from a bank, credit union, or online lender.
The best consumer loans and lines of credit
With so many options available, it can be hard to know where to start. To help you get an idea of what you can expect, we’ve put together a list of six of the top consumer loans and lines of credit.
As you review each of the loan options we’ve listed, pay attention to rates and fees, repayment terms, and other features each lender offers borrowers.
Citizens Bank: Best for low rates
In February 2018, the average interest rate on a 24-month personal loan was 10.22%, according to the Federal Reserve. With Citizens Bank, though, you might get rates as low as 5.99%.
What’s more, the lender offers interest rate discounts if you have an eligible account with Citizens Bank and if you set up automatic payments. In total, you can reduce your rate by up to 0.50%. Other highlights include:
Fixed rates from 5.99% to 18.99%
Borrow from $5,000 to $50,000
Repayment terms between three and seven years
Strong credit history and an annual income of at least $24,000 needed to qualify
If you’re planning a big home improvement or another high-cost project, SoFi allows you to borrow from $5,000 up to $100,000. Many other personal loan companies don’t even come close to that level. Here are some more details to know about SoFi personal loans:
Rates from 5.90% to 15.24%
Repayment terms of three, five, and seven years
Variable and fixed interest rates
Special community benefits include rate discounts on future loans, unemployment protection, community events, career coaching, and more
Some of the best personal loan companies require that you borrow at least $5,000 to $10,000. But if you don’t need anywhere near those amounts, consider Upgrade. Loans start at $1,000 and go as high as $50,000. Here’s what else you need to know about the lender:
Depending on what you need, one of the following lines of credit can be better than the others. Consider the monthly payment amount, credit limit, annual fee, and availability.
KeyBank: Best for an unsecured credit line
Unsecured debt can be expensive, but KeyBank offers a decent interest rate range on its Preferred Credit Line.
Depending on your creditworthiness, your variable APR will be between 9.99% and 15.24%, as of June 13, 2018. That’s lower than the average credit card interest rate, which was 15.32% in February 2018, according to the Federal Reserve. But be sure to double-check the latest rates on the KeyBank website.
Here are some other highlights to keep in mind:
Credit limits from $2,000 to $50,000
Monthly payment of $50 or 0.83% of the outstanding principal balance plus interest, fees, and past due amounts.
Access funds online, in a branch, or by writing a check
Variable interest rates
$50 annual fee
Live in one of the following states to open a line of credit: Arkansas, Colorado, Connecticut, Idaho, Indiana, Massachusetts, Maine, Michigan, New York, Ohio, Oregon, Pennslyvania, Utah, Vermont, or Washington
Line of credit can be used as overdraft protection for KeyBank checking account
If your credit line is $5,000 or more and you set up automatic payments, you could qualify for a rate discount of up to 0.50%. Other highlights include:
Credit limit ranges from $250 to $100,000
Monthly payment of 5% of your outstanding balance or $10, whichever is greater
Access funds online, by phone, in a branch, or by writing a check
Variable interest rates
$50 annual fee
Live in one of the following states to open a line of credit: Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, or Texas
Can use line of credit as overdraft protection for Regions Bank checking account
Credit limit can be up to 100% of available balance in a Regions savings or money market account
If you need a jumbo-sized line of credit, the SunTrust Personal Credit Line Plus offers credit limits from $25,000 all the way up to $500,000. As of June 13, 2018, you could qualify for a variable interest rate between 7.90% and 8.70% APR. Check SunTrust’s website for the latest rates.
You could also get a 0.25% interest rate reduction if you sign up for automatic payments from a SunTrust bank account.
Here’s what else you need to know about the Personal Credit Line Plus:
Terms up to four years
Variable interest rates
No annual fee
No collateral required
Live in one of the following places to open a line of credit: Alabama, Arkansas, Florida, Georgia, Maryland, Mississippi, North Carolina, South Carolina, Tennesee, Virginia, Washington, D.C., or West Virginia
Need at least $100,000 in verifiable assets to qualify
How to choose between consumer loans and lines of credit
A consumer loan is typically better if you have one specific reason to borrow money and don’t anticipate needing credit on an ongoing basis. In contrast, getting a line of credit is a good idea if you anticipate needing to borrow on an ongoing basis. For example, small businesses often get a line of credit to help leverage ongoing short-term cash needs.
Also consider a line of credit if you want a lower variable rate, but understand that it might increase in the future. To determine which one is better, consider your needs and preferences.
Picking the right lender
While we’ve listed a few different lenders above for consumer loans and lines of credit, these aren’t the best for everyone. In addition to considering other top personal loan companies, look at other lenders that offer lines of credit.
Specifically, take a look at your local credit unions. Credit unions often charge lower interest rates and fees than banks because they’re not-for-profit organizations. This means that they return profits to their members in the form of better products and services.
As you shop around, compare not only interest rates but also other details, such as the monthly payment amount, fees, and repayment terms. Doing your due diligence can put you in a better position to pick the loan or line of credit that works best for you and your situation.
Note: Student Loan Hero has independently collected the above information related to personal lines of credit. KeyBank, Regions Bank, and SunTrust have neither provided nor reviewed the information shared in this article.
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.