Say you urgently need a new computer after yours unexpectedly crashed, but doing so might put you in a bit of a spot financially. Instead of pushing yourself to the limits, you could look into setting up a line of credit instead.
A line of credit really lets you open the doors to cover unexpected expenses that you would otherwise be unable to make. Yes, it’s kind of like a credit card, but you can deal directly in cash with your line of credit.
So, now that we have your attention, let’s look at everything you need to know about applying for a line of credit.
The Basics of Credit Lines
Like we said before, a line of credit is very similar to a credit card, at least when it comes to comparison. The major difference between the two is one deals in cash that is extended to you from the lender, while the other is based directly on credit approval and a monthly statement. Basically, a line of credit helps companies who deal in cash always have what they need on deck if an emergency comes up.
When you are using a line of credit, you need to be prepared to pay it off. Just like credit cards, you have to pay on the money you owe. The lending limit can go higher than most credit cards,. The major difference is the rewards programs that credit cards offer that lines of credit don’t, but you may have to pay an annual fee to be a part of those.
The final major difference is the security status. Most credit cards are unsecured credit, but lines of credit can go either way.
The Requirements for Applying
To apply for a line of credit, you need to be able to check off all the following:
- Be of Legal Contracting Age in Your State
- Be a US Citizen or Permanent Resident
- Be a Resident of the State the Line of Credit is Extended In
- Have an Active Bank Account
- Have a Regular Source of Income
- Have a Valid Contact Number and Email Address
- Other requirements could apply based on lender preferences
If you can check all the boxes, you may be approved for a line of credit. How far the extended credit line goes has to do with your credit and financial standing, so you will need to apply to be sure.
How quickly can you get a line of credit?
Depending on your credit, the lender, and the amount you are trying to open a line for, approval can happen in as a little as one business day after your application is approved.
Paying Back a Line of Credit
Paying back the line of credit is just like paying off a credit card. You only pay off what you use, and the interest rates are applied to the used sum. You have to make minimum monthly payments to keep your account open, but you should always strive to pay off the total if you can.
If you can’t pay off the total at that time, try to make a payment above the minimum to keep your account and credit in good standing. As you pay off your credit line, the lender might start to extend the amount you can take from the line. If you pay off your bill or make higher monthly payments, you could be more likely to receive this courtesy.
Quotes and Numbers
A line of credit can really come in handy, especially during a tight month. While some are solely meant be used for unexpected emergency expenses, others could be used to buy into an unplanned business opportunity or pick the week’s groceries before payday on Friday. No matter what you use it for, it’s a great way to build your financial lending portfolio and open future financial doors.
If you do open a line of credit, make sure you pay attention to the terms and conditions you are offered. Different lenders will offer different rates, so make sure you shop around for the best deal. Make sure you are able to pay for all of the expenses you take from the line of credit and the interest that will be applied from what you take.
Don’t miss out on an opportunity just because you can’t pay right now. Getting a line of credit could help float you in times of unexpected financial hardships, until you get back on your feet.
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