Best Personal Lines of Credit

If you’re hoping to finance a personal project and need a large amount of cash to get started, you may be wondering what your best option is. Aside from having the option to use money from an existing savings account, what else should you consider? Between credit cards, personal loans, and personal lines of credits, you have many ways to get capital for the short-term.

Depending on your individual goals, securing a personal line of credit might be a good plan for you. A personal line of credit has features of both a credit card and personal loan combined. With it, you use what you need and pay the rest back with interest.

Here, we’ll review what you need to know about taking out a personal line of credit. We’ll also explain how you can get started and introduce five highly rated lines of credit you might consider.

On this page:

• What is a Personal Line of Credit?
• Best Personal Lines of Credit
• How You Can Use a Personal Line of Credit
• Is a Personal Line of Credit Right for You?​

What is a Personal Line of Credit?

A personal line of credit makes it possible for you to access a large amount of cash but only borrow the amount of money that you need. Payments are variable depending on your outstanding balance.

The biggest difference between a personal line of credit and a personal loan is that a personal loan is given out in one lump sum. However, a personal line of credit is reusable. It’s similar to a credit card in that you take what you need and pay back the rest. Most personal loans require no collateral, although that's not always the case.

The main difference between personal line of credit and a credit card is that credit cards are ideal for earning rewards and making small daily purchases. A personal line of credit is best when you need access to a larger amount of cash, and it likely won’t come with rewards. A credit card will charge a fee for a cash advance, whereas a personal line of credit is taken out specifically for that reason.

However, a personal line of credit is not as easy to take out as a credit card. And the amount you’re able to borrow will depend largely on your credit history, particularly to secure the prime rate.

Best Personal Lines of Credit

The personal line of credit that will be best for you will depend on several factors like your credit score, the interest rate, and the amount you are hoping to borrow. It will also depend on whether you need a secured or unsecured line of credit. If you take out a secured line of credit, you’ll use some type of collateral like your car or home to secure the loan.

Unsecured lines of credit don’t require any collateral. Many people prefer unsecured lines of credit because they don’t require them to risk assets as collateral, like their home. However, the interest will be higher on unsecured lines of credit because in this case, you pose a greater risk to the lender.

Personal lines of credit are typically offered by banks and credit unions. Here are five of the best personal lines of credit to consider:

Regions Bank

Regions Bank is among your best bets if you’re looking for a secure line of credit. The bank’s current variable rates start at 6.75%, and the credit limits range from $250 to $100,000.

You could earn a 0.50% rate discount by setting up automatic payments, or if your credit line is higher than $5,000.

Upgrade

Upgrade is an online marketplace lender. Founded in 2016, Upgrade offers a line of credit up to $50,000 with low fixed interest rates. And they don’t charge any origination fees and will work with borrowers to schedule affordable monthly payments throughout the loan term.

One of the advantages of choosing Upgrade is they don’t charge any prepayment penalties. So, you won’t be charged extra if you pay back your loan early.

SunTrust

If you are looking for an unsecured loan with a high credit limit, SunTrust might be a good option for you. This bank offers an unsecured personal line of credit up to $500,000 with variable interest rates and annual percentage rates. And there are no application or annual fees.

However, you must borrow a minimum of $25,000. And you must have excellent credit and at least $100,000 in personal assets to qualify.

Wells Fargo

Wells Fargo offers personal lines of credit at competitive variable interest rates. You can take out a line of credit between $3,000 and $100,000, and you could receive access to the funds as soon as the next business day. Wells Fargo also offers discounts to members who are willing to set up automatic payments.

KeyBank

KeyBank offers variable interest rates between 9.24% and 15.24%. This is a good unsecured loan option for anyone who has a modest credit score or less than perfect credit qualifications.

The lines of credit are smaller, ranging from $250 to $5,000. However, KeyBank is only located in 13 different states, so it may not be available to all interested applicants.

How You Can Use a Personal Line of Credit

A personal line of credit is usually best for one-time, specific financial objectives. Most people take out a personal line of credit when they need quick access to a large amount of cash.

For instance, you may take out a personal line of credit if you want to fund a business opportunity, pay for a home repair, or pay an unexpected tax bill. And sometimes, individuals with irregular income will use a revolving line of credit to pay bills, and pay it back when their next paycheck arrives.

Of course, some people do use it for everyday expenses, though this is not recommended because of the cost of interest.

In many cases, a personal line of credit may not be your best option to fund a large expense. For example, if you plan to use the money for a home project, then a home equity line of credit (HELOC), with lower rates and tax advantages, may be a better option.

A HELOC allows you to pay for a home improvement project using your home as leverage. Interest rates on a personal line of credit tend to be much higher than a home equity line of credit. And interest rates on HELOCs are usually tax-deductible whereas the interest on a personal line of credit is not.

But if you do choose to take out a personal line of credit, you will need to have a strong credit history to qualify. And most banks will consider your current employment and other factors.

Is a Personal Line of Credit Right for Me?

There are many advantages to taking out a personal line of credit. You’ll receive quick access to the funds, and most banks offer competitive interest rates.

And if properly managed, a personal line of credit can be a good alternative to taking out a personal loan, as you won’t take out more than you need. It can also be a better alternative to a credit card, which is likely to have higher interest rates. However, personal lines of credit do have drawbacks, so they won’t be the right choice for everyone.

Just like with credit cards, if you run up a high balance it can negatively impact your credit score. Generally, you want to keep the balance around 30 percent of your established line of credit. If you think this might not be possible, a personal loan may be a better option for you.

And though the rates on personal lines of credit are better than credit cards, they are still relatively high, and you’ll be expected to pay these loans back pretty quickly.

Bottom Line

There are many advantages to taking out a personal line of credit. If you’re approved, you can usually access the money within just one or two business days.

You also may have the option to tie it to your checking account as a form of overdraft protection. And the interest you pay on a personal line of credit will likely be lower than on a credit card.

However, it’s important to only take out that amount of money that you will actually need. Be realistic about your current income level and what you are able to repay. Whether a personal line of credit is right for you will depend on your specific financial situation. And if you want to find the best personal line of credit, it’s imperative that you do your homework first.

So, whatever financing method you end up choosing, just make sure you consider all of your available credit options before making any final decisions. And always have a plan for how you will use the money – and how you plan to pay it back.