A credit line is a revolving type of credit which means you can borrow as often as you need to, within your credit limit. They are designed to help you manage your cashflow and monthly spending, as well as emergency or unexpected payments so that you can continue your usual routine without the additional stresses that troubled finances can bring.
Credit lines are available online so they’re accessible to almost everyone in the UK – as long as you have internet access. They are considered an alternative to payday loans and credit cards but work in a similar way to both. If your application is approved, you can withdraw as much money from your credit line as you need to, up to your pre-agreed credit limit. The funds are transferred directly into your nominated bank account for you to spend by your usual means – whether that’s by standing order, direct debit or even just using your current account debit card.
Repaying a credit line is flexible as you are only required to make a minimum payment each month. The minimum payment typically includes the transaction fees, interest accrued and a portion of the amount you’ve withdrawn. While you only need to make the minimum payment to keep your credit line up to date, you are encouraged to repay as much of the outstanding as balance as you can afford each month as only making small repayments will take you longer to repay the full balance and will end up costing you more.
Credit lines offer the accessibility of payday loans with the flexibility of credit cards, so there are various benefits to this type of borrowing.
If you can’t afford to repay the full balance at the end of your statement period from time to time, you only have to repay the minimum payment that month. At Polar Credit, it costs £6.60 in interest and charges to borrow £100 for 30 days. This means you can maintain your financial responsibilities without breaching the terms of your credit agreement as your credit line will remain up to date. If you can afford to pay more some months, you can simply log into your online account and make a payment.
When you take out a loan, interest is charged for the full amount you’ve borrowed, even if you only use a portion of it. With a credit line, you will only be charged interest on the amount you have withdrawn into your bank account, not on your full credit limit. And, if your balance is repaid and you haven’t withdrawn any funds during your statement period, you won’t be charged anything at all. This makes credit lines an accessible and reliable way to borrow as your finances fluctuate throughout the year.
Because a credit line is a running account product, you only need to apply once, instead of every time you wish to borrow, making the process of borrowing after you have been approved quick and simple.
At Polar Credit, there are additional benefits that might not be included with other credit line services. Polar Credit offers credit limit reviews so that you can increase or decrease your credit limit as your financial life requires. This means, if you need to borrow a little more or you have a large upcoming expense, we can review your account and potentially increase your credit limit. If you’re trying to reduce your borrowing, or your financial circumstances have changed and you don’t need to borrow as much anymore, you can also reduce your credit limit.
Polar Credit also reduces the interest charged on your credit line after your one year anniversary, and then every six months thereafter, as long as you stay within the terms of your credit agreement and use your credit line sensibly. This is because we believe responsible borrowing should be rewarded, and it helps people work towards low-interest rate borrowing, even if they have a bad credit history.
However, while there are several benefits to having a credit line, it’s important to remember that borrowing is a financial commitment, and you should only apply when you know you can afford the repayments. Even low cost credit can cause financial difficulty if you are unable to maintain the repayments. As a running account credit service, credit lines are not a fixed term loan product like an instant loan, and therefore can encourage overspending by having easy access to credit. If you know you struggle to manage your money, or you’re already a little worried about your finances, a credit line may not be suitable.
If you’ve decided that a credit line would work for you, and you’ve weighed the pros and cons with consideration to your personal circumstances, then applying for a credit line is very straightforward. Credit lines are typically an online-only service which means you can submit an application any time of the day and any day of the week. Most lenders use automated systems to review your application, so you will get a quick decision even if you submit your application outside of the lender’s business hours. Credit line applications are usually quite quick to complete, taking no more than 10 to 15 minutes, and lending decisions are typically provided on the same day.
Having a low credit score can mean your borrowing options are limited. However, small personal loans for people with bad credit aren’t the only way to borrow if you find yourself excluded from mainstream credit options. Loans have their own advantages, like quick pay-outs and definitive loan terms, but if you know you often need help managing your cashflow, or you just want access for a more regular way to borrow, then a credit line might be preferable. There aren’t many credit line providers at the moment, but the ones that currently offer the service do tend to consider people who don’t have a brilliant credit history.
Applying for credit is not a decision that should be made lightly – from overdrafts to buy now pay later: all types of borrowing should be carefully considered. You need to ensure you can afford the repayments, even if you are only required to make minimum payments, and that if something does go wrong, you have the financial resilience to deal with the situation. You should also check if you actually need to borrow. You might just be applying so that you have the availability of credit in case an emergency comes up, but if you’re looking for ways to borrow to finance non-essentials or because your income doesn’t cover your usual expenditure, then you might need to rethink your budget rather than apply for credit. While credit is designed to help you, it can make your finances worse if you borrow irresponsibly or don’t consider your true circumstances before you apply.
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