Compare personal loans vs. lines of credit: Which offers better terms?

Compare personal loans vs. lines of credit

We know that everyone's situation is unique and we aim to help you find the right product for you. We may receive compensation when you visit our partners' sites or are approved for their products. You can read more about how we maintain editorial independence and how we make money here.

Which offers better terms? A personal loan or line of credit? The answer is in the details.

With the extreme variety in today’s financing options, it can get very confusing when deciding between two basic borrowing options: personal loans or lines of credit. Each has its own advantages and disadvantages, but making the wrong choice could be very expensive. Choosing the most appropriate option for your situation could potentially save you lots of money in interest and fees.

Even Financial Personal Loans

Even Financial Personal Loans

Quickly get matched to the best personal loan offer from top online lenders.

  • Minimum Credit Score Needed: 580
  • APRs as low as: 4.99%
  • Minimum Loan Amount: $1,000
  • Maximum Loan Amount: 100000
  • Simple online application process
  • Free loan matching service

    Six main differences between personal loans and lines of credit

    • Loan term. Personal loans have a predetermined term length, usually between one and seven years. They’re paid back in full by the end of that term. However, lines of credit don’t come with a set repayment period, and the funds you borrow become available again after they’re repaid (plus interest).
    • Repayments. Both involve monthly repayments. However, personal loans have fixed monthly repayments while lines of credit depend on the previous balance, amount drawn, accruing interest and other factors.
    • Time of disbursement. With personal loans, your lender will disburse your funds upfront as soon as you agree on the loan contract and sign it. With lines of credit, you’re able to withdraw up to your approved limit on an ongoing basis as long as you’re meeting minimum monthly repayments.
    • Fees. Personal loans usually charge monthly service and application fees while lines of credit usually charge annual service fees. However, lenders for both personal loans as well as lines of credit may charge a variety of other hidden fees. Make sure you’re aware of all fees for any option you’re considering.
    • Borrowing amounts. With a personal loan, you’re given a lump sum of money that you have to pay back in full. Lines of credit come with a borrowing limit instead — similar to a credit card. This means you can take what you need, when you need it.
    • Costs. Being able to borrow only what you need can make lines of credit less expensive. This is because you’re be on the hook for less money — and therefore less interest. Even if your rates are higher than a personal loan.

    Compare your personal loan options

    Rates last updated June 24th, 2018

    Reveal your potential loan offers and rates

    Answer two quick questions to filter the loan offers and get the best one for you.

    Select your credit score range

    I don't know my credit score

    Finally, select where you live.

    To get your credit score:

    Experian logo

    Experian is a leading provider of personal and business credit reporting. Find out your FICO score now for less than the cost of a cup of coffee.

    Unfortunately, none of the personal loan providers offer loans for that credit score. If you are in urgent need of a small loan, you might want to consider a short term loan.
    Name Product Product Description Minimum Credit Score Max. Loan Amount APR
    Best Egg Personal Loans
    A prime lender with multiple repayment methods.
    700
    $35,000
    5.99%–29.99% (fixed)
    Upgrade Personal Loans*
    Affordable loans with two simple repayment terms and no prepayment penalties.
    620
    $50,000
    5.96%–35.97% (fixed)
    LendingPoint Personal Loans
    Get a personal loan with reasonable rates even if you have a fair credit score in the 600s.
    600
    $25,000
    15.49%–34.99% (fixed)
    Even Financial Personal Loans
    Get connected to competitive loan offers instantly from top online consumer lenders.
    580
    $100,000
    4.99%–35.99% (fixed)
    SoFi Personal Loan Fixed Rate (with Autopay)
    No fees. Multiple member perks such as community events and career coaching.
    740
    $100,000
    6.199%-15.365% (fixed)
    Monevo Personal Loans
    Quickly compare multiple online lenders with competitive rates depending on your credit score.
    580
    $100,000
    3.09%–35.99% (fixed)
    Prosper
    Borrow only what you need for debt consolidation, home improvements and more — with APRs based on overall creditworthiness.
    640
    $40,000
    6.95%–35.99% (fixed)
    Laurel Road Personal Loans
    Get a personal loan with no application or origination fees and a rate discount for autopay.
    680
    $45,000
    5.5%–11.74% (fixed)
    FreedomPlus Personal Loans
    Consolidate debt and more with these low-interest loans. Cosigners welcome.
    640
    $35,000
    4.99%–29.99% (fixed)
    LendingClub Personal Loan
    A peer-to-peer lender offering fair rates based on your credit score.
    660
    $40,000
    5.98%–35.89% (fixed)
    CompareFirst Personal Loans
    An easy-to-use loan connection service geared toward introducing first-time borrowers to affordable personal loans.
    580
    $50,000
    2.99%–36% (fixed)
    OneMain Financial Personal and Auto Loans
    An established online and in-store lender with quick turnaround times. Poor credit is OK.
    300
    $30,000
    16.05%–35.99%* (fixed)
    NetCredit Personal Loan
    Check eligibility in minutes and get a personalized quote without affecting your credit score.
    550
    $10,000
    34%–155% (fixed)

    Compare up to 4 providers

    Benefits of personal loans and lines of credit

    Personal loan

    Personal loans provide your funds upfront and stipulate an agreed time period to pay back your loan (called the “loan term”). Interest is charged on the entire duration of your loan term and on your entire loan amount. In general, most personal loans involve the following features:

    • Upfront lump-sum. Once the lender approves your application and you agree to the loan contract, you’ll receive all your funds upfront.
    • Interest rate. Your lender will charge either a fixed interest rate that won’t change over the term of your loan, or a variable interest rate which can rise or fall depending on market rates. Learn more about the difference between fixed and variable interest rate loans.
    • Term. The period over which you’ll be making repayments to fully pay back the loan is called the loan term. It generally ranges between one year and seven years.
    • Discount rates. Your lender may offer you a limited time discount if you take out a significant loan amount.
    • Flexible repayments. Depending on your lender, you may be able to choose exactly how and when you’ll be making monthly repayments.

    Line of credit

    Lines of credit have a maximum credit limit, and you’ll only be charged interest on the funds you actually use. Repayments are made monthly, but there’s no fixed “term” for a line of credit. As long as you’re making your minimum monthly repayments, your funds will always be available to you.

    • Option to increase maximum credit limit. Your lender may provide an option to increase the maximum credit limit in line with your specific needs.
    • Flexible withdrawals. You’ll be able to withdraw funds from your line of credit whenever you like, as long as it doesn’t exceed your maximum credit/daily limit.
    • No fixed repayments. As long as you’re making a minimum required monthly payment (a percentage of withdrawn funds), there’s no fixed repayment amount.
    • Interest rate. Interest is paid monthly and is only charged on the amount you borrowed.

    Which borrowing option is better suited for you?

    Lines of credit are helpful for those needing ongoing sources of funding to be used when they see fit. Since lines of credit are revolving, you won’t be charged on funds you don’t withdraw, making them an excellent option for backup sources of funding.

    Since interest rates could get expensive for lines of credit, they are suited to those looking for flexibility with their credit and an ongoing source of funds for purchases such as paying bills, consolidating short-term debt and shopping.

    Ultimately, a personal loan is suited to someone who wants structured repayments and an initial lump sum paid to them at the beginning of the loan term. A personal loan is well suited for those looking to make large purchases such as for a wedding or car using that lump sum. Also, a personal loan can be appropriate for those looking to consolidate a large amount of debt.

    Compare loans for different purposes

    Compare personal loans to even more borrowing options

    Personal loan vs. Mortgage
    Personal loan vs. Home equity loan
    Personal loan vs. 401(k) loan
    Personal loan vs. Business loan
    Personal loan vs. Student loan
    Personal Loan vs. Home equity line of credit

    Frequently asked questions to find the right borrowing option for you

    Was this content helpful to you? No  Yes

    Ask an Expert

    You are about to post a question on finder.com:

    • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
    • finder.com is a financial comparison and information service, not a bank or product provider
    • We cannot provide you with personal advice or recommendations
    • Your answer might already be waiting – check previous questions below to see if yours has already been asked

    Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms and Conditions and Privacy Policy.

    2 Responses

    1. Default Gravatar
      CarlJanuary 11, 2018

      What is a FLEXIBLE line of credit

      • finder Customer Care
        ArnoldJanuary 12, 2018Staff

        Hi Carl,

        Thanks for your inquiry

        The option to have a revolving line of credit that lets you access your funds as and when you need to. This is an example of a flexible line of credit.

        Hope this information helps

        Cheers,
        Arnold

    US Personal Loans Offers

    Important Information*
    Even Financial Personal Loans

    Get connected to competitive loan offers instantly from top online consumer lenders.

    Prosper

    Borrow only what you need for debt consolidation, home improvements and more — with APRs based on overall creditworthiness.

    LendingClub Personal Loan

    A peer-to-peer lender offering fair rates based on your credit score.

    SoFi Personal Loan Fixed Rate (with Autopay)

    No fees. Multiple member perks such as community events and career coaching.

    Go to site