Enjoy easy access to additional funds whenever you need them with a line of credit.
A line of credit can provide you with a convenient way to draw on funds as and when you need to. You can use the funds to make multiple purchases or just to have in case of an emergency.
The flexibility of a line of credit personal loan allows you to withdraw funds up to a pre-determined limit. Interest is only charged on what you owe, not on the entire credit limit. Find out more about this method of borrowing and if it’s right for you in our guide below.
How does a line of credit work?
A line of credit works similar to a credit card, giving you a specified credit limit to use how you like. The main difference is the limit is usually higher, while the rates are relatively lower than credit cards.
You won’t need to submit a credit application every time you need to make a withdrawal — once you’re approved the funds are there for you to use when you need them. No interest is charged on your entire balance, only on the funds you withdraw. You can even get some lines of credit that are linked to a debit card, giving you more flexibility.
What lenders offer lines of credit?
| Provider | Min/Max amounts | Annual fee | APR range |
|---|---|---|---|
| Wells Fargo Bank | $3,000–$100,000 | $25 | Not listed |
| SunTrust | $25,000–$500,000 | No Fee | 7.90%–8.70% |
| Santander Bank | $5,000–$35,000 | $25 | As low as 8.70% |
| CIBC | $5,000–$10,000+ | No Fee | Variable |
| U.S. Bank | Up to $25,000 | No Fee | 11.75% |
| Chase | $50,000–$500,000 | $50, plus $50 opening fee | 5%–6.89% |
| Upstart | $1,000–$50,000 | Not listed | 8.92%–29.99% |
| Citi | $1,500–$25,000 | Not listed | 9.74%–21.74% |
| PNC | $1,000–$25,000 | Not listed | Variable, based on WSJ Prime Rate |
| KeyBasic | $250–$5,000 | Not listed | 12.99%–22.99% |
| TD Bank | $20,000–$50,000 | $25 | 9.75%–14.75% |
| Union Bank | $5,000–$250,000 | Not listed | Variable |
| Upgrade | $500–$50,000 | Not fee | 6.46%–35.89% |
Line of credit product details last verified in June 2018
How is a line of credit different from a personal loan?
One main difference is how they’re repaid. Personal loans give you a lump sum of money to be repaid over a fixed term, usually between one and seven years. Lines of credit, on the other hand, don’t come with a set repayment period.
Compare lines of credit vs. personal loans
What can I use a line of credit for?
Generally, lines of credit are great in two situations: When you can’t predict the cost of something and when you need access to cold, hard cash.
- Rainy day fund. Don’t have savings? A line of credit can give you quick access to money if you have an unexpected expense that are difficult to pay for with a credit card like rent.
- Home improvements. You can’t pay a contractor with a credit card and it can be hard to predict how much a home improvement project will cost down to the last dollar. A line of credit keeps you prepared.
- Large ongoing projects. Since lines of credit can have higher limits than credit cards, it can be a more flexible choice.
A selection of top personal loans to consider
How to compare your borrowing options
Whether you’re considering a line of credit or personal loan, it’s important to compare your options to get the right one for you. Here are some features to keep in mind when comparing personal loans and lines of credit:
- The interest rate. In addition to comparing the interest rates, it’s important to know how they’re applied. For lines of credit, check that the interest is being applied only to the funds you have withdrawn, not on your total balance. For personal loans, keep in mind that in some cases you may have the option of securing the loan against an asset which could result in a lower interest rate.
- The fees. Compare fees carefully as they aren’t always set out as clearly as the interest rate. While lines of credit and personal loans may advertise no annual fee, there could be monthly fees or an establishment fee. Make a running list of fees for each lender you’re considering and factor that into your repayment budget.
- The terms. Many lines of credit and personal loans are repaid with monthly payments. Be sure that the due dates fit your budget. If you’re applying for a personal loan, note there are different term lengths as well.
- How accessible your funds are. Another thing to consider with is how you will access your funds. Personal loans are typically deposited into your bank account in one lump sum. The disbursement varies between lenders, is usually within a week. With lines of credit, you can withdraw funds as you need. But there may be a delay between the withdrawal date and when the funds appear in your account.
Pros and cons of lines of credit
Pros
- You’re only charged for what you use. In most cases you will be charged interest only on the funds you have borrowed as opposed to the total credit limit.
- You have easy access to your funds. If your account is linked to a card, you may be able to draw the funds you need through ATMs.
- There are flexible terms. You can use the funds how and when you need to, making for a very flexible financing solution.
Cons
- Fees and charges. Be mindful that fees and charges will likely apply, such as an annual fee, establishment fee or a monthly service fee.
What are the risks associated with lines of credit?
- Overspending. For those who are easily tempted, the thought of a seemingly unlimited amount of funds may cause them to make purchases that are unnecessary.
- Extra fees. Be sure to read the terms and conditions carefully for any extra fees that may not have been clear on your application.
What you’ll need to apply
The eligibility criteria varies between lenders, so make sure to check this carefully before submitting your application. Be prepared with the following information that’s commonly required on many line of credit and personal loan applications:
- Income. You’ll have to show proof of an ongoing steady income. Your pay stubs are usually acceptable or a bank statement which shows consistent deposits from an employer.
- Info on your existing debt. You may be asked to provide information on your current debts.
- Identification. Most lenders will require government-issued ID to verify your identity.
- Assets. Highly valuable property you own, plus cars, savings and investment accounts can be counted as assets.
