Line of Credit
Tips on getting a line of credit
A line of credit is a financial product that banks and financiers make available to creditworthy consumers and businesses with various borrowing needs. There are two main types of credit line available: a personal line of credit and a business line of credit.
Both personal and business lines of credit have distinct advantages over standard credit cards. They help you save because their interest rates tend to be much more competitive than consumer or business credit cards. In many cases, the interest rate on credit lines is tied to the prime rate, so they are particularly attractive when rates are falling or are already low.
Features of a Personal Line of Credit
A personal line of credit is an excellent option when you need to borrow a sizeable amount of money but don't want to pay interest on a loan. Your bank can give you instant credit line approval, with your maximum borrowing limit determined by your financial situation and creditworthiness. You only pay interest on money you actually use, rather than the entire amount of your line of credit.
With a line of credit, you can borrow any amount you need, up to your credit limit, at any time. You can withdraw cash and write checks as though the money were in your own bank account, and you don't have to reapply to use the line of credit again once you pay back what you've already borrowed. The service fees you'll be charged also tend to be lower than those you'll find with credit cards and standard checking or savings accounts.
A home equity line of credit is a popular option with many homeowners. These lines of credit use the equity you've built up in your home as collateral for the bank or lending institution. With a home equity line of credit, your borrowing limit is usually set at the amount of home equity you have or the appraised value of your home.
Get a Business Line of Credit
A business line of credit works the same way a personal one does— it is a flexible hybrid of a loan and a credit card. Business credit lines help you grow your business by giving you access to the money you need when you need it without saddling you with the restrictive terms and conditions of many small business loans.
Many business lines of credit have both secured and unsecured options available, and they present you with an excellent opportunity to build positive business credit. If you tie your business line of credit to your business bank account, you can lower your fees even more because you're only using the money you really need.
A line of credit is one of the most flexible and wise options available to private and commercial borrowers. If you've got good credit and are in good standing with your bank, you should encounter little difficulty in qualifying.