In an ideal world, we’d all have enough and never have to borrow money. However, it’s a fact that for many, consumer loans and lines of credit can help finance necessary purchases we can’t afford on our own.
But countless lenders offer various consumer loans and lines of credit, which 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:
- Auto loans
- Student loans
- Personal loans
Also known as installment loans, they come with set monthly payments and repayment terms and accounts are closed once the debt is repaid.
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 fixed and variable interest rates, 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 banks, credit unions or online lenders.
4 of 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 four of the top consumer loans and lines of credit.
We chose these companies because they’re emblematic of some of the most reputable lenders of consumer loans and lines of credit. Their competitive rates, few fees and features like repayment flexibility and overdraft protection are reasons why they stand out.
|1. SoFi||Large loans|
|2. Upgrade||Small loans|
|Lines of credit|
|3. KeyBank||Unsecured lines of credit|
|4. Regions Bank||Secured lines of credit|
Top 2 consumer loans
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.
SoFi: Good for large loans
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:
- Fixed APRs from 7.99% to 23.43%
- Repayment terms between 24 to 84 years
- No origination fee
- Special membership benefits include rate discounts on future loans, unemployment protection, career coaching and more
- No collateral required
Upgrade: Good for small loans
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:
- Rates from 7.96%–35.97%
- Repayment terms of 24 to 84 years
- Fixed interest rates 7.96%–35.97%
- Origination fees between 1.85% – 8.99%
- Free credit monitoring through Upgrade’s Credit Health tool
- No collateral required
Top 2 personal lines of credit
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: Good for an unsecured line of credit
Unsecured debt can be expensive, but KeyBank offers a decent interest rate range on its Preferred Credit Line.
Your variable APR depends on your creditworthiness and location. For New York City borrowers, for example, rates spread between 8.25% and 13.50%, as of Dec. 16, 2021. That’s lower than the average credit card interest rate, which was 14.54% in August 2021, 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 $25,000
- Access funds online, in a branch or by writing a check
- Variable interest rates 7.99%–13.49%
- No annual fee
- Borrowers must live in one of 15 states to open a line of credit: Arkansas, Colorado, Connecticut, Idaho, Indiana, Massachusetts, Maine, Michigan, New York, Ohio, Oregon, Pennsylvania, Utah, Vermont or Washington
- Line of credit can be used as overdraft protection for KeyBank checking account
- No collateral required
Regions Bank: Good for a secured line of credit
If you don’t qualify for an unsecured line of credit or you’d prefer a lower interest rate, Regions Bank’s Savings Secured Line of Credit might be worth considering. As of Dec. 16, 2021, the bank offers variable rates starting from 5.25% APR. Check Regions Bank’s website for the most up-to-date rates.
Other highlights include:
- Credit limit ranges from $250 to $100,000
- Monthly payments 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 4.74%–16.49%
- $50 annual fee
- Borrowers must live in one of 16 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
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 lines 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 necessarily 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. SoFi, Upgrade, KeyBank and Regions Bank have neither provided nor reviewed the information shared in this article.