3 Reasons a Personal Line of Credit May Work for You
If you need quick cash for a planned or unexpected expense, personal lines of credit may work for you. They give you access to a revolving line of credit provided you repay the money with interest. They also adjust your monthly payment based on your outstanding balance. Here are three reasons you may wish to consider personal credit lines.
1. You Need an Unspecified Amount of Cash for an Extended Period
Planned and unexpected occasions such as weddings and home repairs can spur many people to apply for personal credit lines. Home repairs, for example, may stretch over months and feature “domino” or unknown costs. Major car repairs or unexpected medical procedures are two more similar scenarios. Other examples include educational and tax costs or emergency between-paychecks funding.
2. Your Financial Standing Says “Yes!”
Banks and credit unions are the institutions that typically offer personal lines of credit. Applicants’ eligibility often depends upon the following and other factors:
- Amount to borrow
Secured or unsecured credit line
If your financial factors, such as credit score, stack up, a personal line of credit may be your best choice for funding for your lifetime or on emergency occasion. However, you need to understand that a secured credit line often requires collateral, such as your car, while an unsecured line typically has a higher interest rate.
3. It’s a Better Alternative Than Using Your Credit Card
Often, banks advertise personal credit lines that feature lower interest rates than your credit card. If this appeals to you, check your bank and its competitors on their credit lines’ interest rates and consider how they compare to your credit card. Also, check with your chosen bank on related perks. For example, you may be able to connect your line of credit to your checking account for overdraft protection purposes. Benefits like this can add to your long-term financial health and stability.
If you’re ready to learn more about personal lines of credit available to you, consult with your local or competing bank or credit union. An experienced representative can give you the information and resources you need to decide whether a personal credit line is right for you. Don’t forget to ask about any perks related to opening a line of credit, including lower interest and higher limits than most credit cards and flexibility. Also, make sure you have a plan in place to repay the money you borrow.