LINES OF CREDIT
A line of credit is a balance of funds that can be withdrawn up to an agreed-upon limit. A borrower can take out small or large amounts as long as they don’t exceed the credit limit. Payments can be made into the line of credit and then borrowed from the balance again. This type of lending arrangement can be helpful for people who need access to funds but don’t want to take out a traditional loan. It can also be useful for people who have irregular income or expenses. However, it’s important to remember that a line of credit is not free money borrowers are still responsible for repaying what they borrow, plus interest and fees.
Overview
A line of credit offers a useful alternative to loans for borrowers who want flexibility in how much they borrow. With a line of credit, borrowers are approved for a high credit limit but can take out only the amount they need. If it turns out that expenses exceed expectations, the borrower can use what they need, pay it back, and borrow again. This flexibility can be helpful for borrowers who are unsure about how much they will need to borrow.
A line of credit is a type of loan that allows the borrower to access a set amount of funds, which can be drawn upon as needed. The interest on a line of credit is based on the amount that is borrowed from the total limit, rather than on the limit itself. For example, if a borrower has a $10,000 line of credit and only borrows $5,000, they will only be responsible for paying interest on the $5,000 until it is paid back in full. The most common type of line of credit is a secured line of credit, which means that it is backed by collateral assets. If the borrower defaults on the loan, the lender can take possession of the asset. Credit lines can also be unsecured, with no collateral assets. Unsecured lines of credit are much harder to qualify for and borrowers with good credit histories are usually the only ones approved.
LOAN HIGHLIGHTS
- Interest is charged only on the amount borrowed, not your credit limit.
- Borrowers are able to take out as much or little money they need, up until their credit limit.
- You can make multiple payments against the balance and then borrow again.
- Both secured and unsecured lines of credit are available.
Disadvantages
- Qualifying for an unsecured line of credit can be difficult.
- The interest rates on these types of loans can be higher than traditional ones, but they're worth the extra cost if it means you'll pay off your loan in less time.
- Line of credit late payment penalties may be higher than traditional loans.
Advantages
- Assets of any kind have value and can be used to generate funds.
- Lines of credit can be a good option for people who don't know exactly how much they need.
- Borrowers pay only for what they borrow.
Quick Application
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