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Benefits & Disadvantages of Credit Lines

Credit lines are ongoing financial solutions that approved applicants can use to borrow money as and when needed. Whether you are using a credit line for business growth or to meet personal emergency expenses, having access to quick credit is a helpful tool for many companies and individuals.

However, before applying for any credit, it’s essential to acknowledge the benefits and disadvantages of the solution.

Like other personal finance options, credit lines aren’t suitable for all candidates. Get to know the benefits and disadvantages of credit lines today to help you decide if this is the right option for your finances. Scroll down to get started.

Benefits of Credit Lines

Here are some of the advantages approved applicants can access with a credit line.

Quick Funds On Demand

One of the primary benefits of a credit line is access to funds whenever you need them. Once approved, applicants can start transferring money to their nominated account on demand — and this can be any amount required (between the minimum and maximum limits).

Fast Application Process

The credit line application process is usually faster than opening a credit card account and, while much cheaper, in terms of application speed is similar to applying for a payday loan. If you’re a good candidate for the service, you can access your credit in a very short amount of time.

Great For Emergency Expenses

Due to the ease and flexibility of credit lines, approved customers can easily pay emergency or short-term expenses. This is great for bridging the gap between paydays, covering your business’ cash flow or just covering emergency costs.

Can Rebuild Your Credit Score

Credit lines can help you rebuild and improve your credit score when used responsibly. This is ideal for anyone who wants flexible credit funds and to strengthen their borrowing capabilities.

Lower Interest Rates

Credit lines have much lower interest rates than a lot of other online borrowing options (such as payday loans). Applicants also only pay interest on the amount borrowed. If you don’t withdraw the whole amount, you won’t be charged for the maximum limit.

Disadvantages of Credit Lines

Having an unbiased view is crucial. Here are some potential disadvantages of credit lines.

Difficult to Forecast Interest

Sometimes it’s more challenging to forecast interest to be paid on a credit line. This is because interest payments depend on the amount of credit you withdraw.

Late Repayments Can Cause Problems

Like many other borrowing solutions, late credit line repayments can lead to money problems and a lower credit score. Applicants should only withdraw as much credit as they can afford to pay.

More Expensive

In some cases, credit lines are more expensive than an arranged overdraft. Interested parties should compare costs to ensure they’re making the best financial decisions.

Credit Line Pros & Cons: The Conclusion

Like any financial decision, you must weigh the pros and cons before deciding. Taking an unbiased look at both sides of the argument is the best way to determine if a credit line will benefit you. Customers should also only apply if they know they can afford to repay any borrowed money.

More Information

How does a credit line work?

The History of Credit Lines

Polar Credit: A New Way to Borrow

For more helpful information about how to manage your money, different financial products or what we do at Polar Credit, take a look at our Info Hub.