What are credit lines used for?

What is an emergency payment?

An emergency payment is generally regarded as a payment which needs immediate attention and not paying it may have adverse consequences. For example, if you receive a fine which doubles if unpaid within 14 days or having to repair a windscreen chip before it turns into a crack and needs replacing altogether. Emergency payments tend to be unexpected and therefore unbudgeted, so they can often create a cashflow shortfall which may result in missed rent payments, utility bills or even a struggle to pay for the weekly food shop.

On these occasions, it might make sense to use your credit line to cover the unexpected costs so you can continue to meet your usual monthly payments without any stress. You can then repay the credit line on your next payday, or even spread the payments over a few months, depending on how much you needed to borrow.

When should I not use my credit line?

While there are some sensible reasons to borrow money from your credit line, what you choose to spend the funds on is up to you. You know your financial circumstances and what you can afford to repay so you should have a pretty good idea about whether you can afford to borrow money for non-emergency reasons.

Sometimes you might need to withdraw cash for something urgent, although not unexpected – think about occasions where you should have budgeted in advance but maybe forgot, like birthdays. While we would not recommend using credit regularly to pay for things like gifts and eating out, if it helps you manage your cashflow from time to time then it can be a useful way to use your credit line. You should only borrow within your means and you should not rely on credit to meet payments where better budgeting would solve the issue.

Other examples of irresponsible uses of credit might include:

• Paying for an expensive holiday
• Buying luxury gifts
• Repaying other borrowing
• Using it as a secondary source of income

Ultimately, it is up to you how you spend borrowed funds. We would only remind you that you do have to pay interest on your Polar Credit Line and so borrowing money unnecessarily means paying interest you did not need to (as well as transaction fees).

Can I use a credit line to pay my rent?

For some people, paying priority bills on time and in full poses no difficulty and for others it can be a regular worry. But regardless of your financial situation, there will likely always come a time when your money is stretched just too far to meet all of your financial commitments on time. When this happens, it can be stressful trying to establish which bills you should prioritise, and where you can get money quickly in order to manage your cashflow.

What are the consequences of not paying my rent?

One of your biggest essential bills is probably your rent, and it can be scary facing the prospect of missing your rent payment as there are some potentially severe consequences. In a lot of cases, your landlord will probably allow you to catch up the arrears over the next few months, but in some cases, missing your rent payment can result in eviction. It is likely that you would have to miss a few consecutive rent payments and ignore any contact from your landlord before this happens, but nevertheless it is a real threat for many tenants, especially those who live on a tight budget.

How can a credit line help with rent?

A credit line allows you to borrow money when you need it to manage temporary cashflow shortfall, but as a running account service, it can also help you to spread the cost of large payments over several months, so you are not left bereft of funds and struggling to make ends meet.

Unexpected cashflow shortfall

One of the ways a credit line can help you meet your rent payment on time is if you find yourself faced with an unexpected payment that hinders your budget for the month. Instead of panicking about how you can meet all of your existing commitments on time, you can use a credit line to cover the unexpected bill and continue with your usual responsibilities as normal. You can either repay your borrowing in full the next time you get paid or spread the balance over a few months – as long as you make at least your minimum payments on time.

Starting a new rent agreement

Another financially challenging scenario people come across is starting a new rental agreement. Often, you have to pay a deposit which can be up to two months’ rent in advance. This can cause even the most financially savvy to struggle a little. A credit line could help you by allowing you to borrow the funds to pay the deposit so your current finances do not take an unmanageable hit all at once, and then you can repay the balance as your cashflow allows, giving you flexibility over your finances.

Compared to a personal line of credit loans can also help in times of financial need, and for some people a fixed term loan may be more suitable than a revolving credit service – especially if you find that you often overspend. You should always consider all of your options before immediately applying for credit, because while it can help you in the short term, using credit you cannot afford to repay can cause bigger money problems further down the line.

What should I do if I frequently struggle to pay rent?

If you often find yourself stressed about your financial commitments, and in particular your non-discretionary expenses, there might be a few things you can consider to make your financial life a little easier.

Firstly, it might be a good idea to try to save some money in the good months, so that you can meet any unexpected expenses without borrowing money in the bad months. It is usually sensible to try to save at least one month’s worth of priority bills (rent, energy bills, food) so that if you suffer a big income shock, you know you can cover your important expenses in the immediate future. From there, try to save up to three months’ worth of wages or priority bills so that if you lost your job, or something similarly impactful, you would have time to recover and find a solution without the added stress of missed payments, arrears or even eviction.

Sometimes though, even savings can do little to help if you have a tight budget or if your expenditure is getting close to exceeding your income. It might be time to look at cheaper accommodation – even if it is just for a year or two – so that you can recover financially and free up some funds to help you meet your financial responsibilities with ease, or to save towards increasing your financial resilience.

If you realistically cannot do either of the above, you may want to consider contacting a free debt advice charity or money advice service to discuss your current circumstances, and what the best way forward might be. It could be something super simple that you have just never thought about before, or you might need more in-depth help, but whatever the solution, you will find it quicker if you reach out for help.

Can I use a credit line to pay my energy bills?

Priority bills are inescapable, whether it is rent, electricity or gas. Unfortunately, like most things in life, necessities are rarely free and, while usually manageable, the rise in living costs is making money management an even more stressful affair.

What are the consequences of not paying my energy bills?

Energy bills can include your water, gas, and electric usage throughout the month. There are various ways to pay your energy bills each month, and some of the most common methods include:

• Direct debit
• Prepayment
• Pay-as-you-go

Depending on how you manage your money and how much energy you use, you may find different ways of paying these bills each month easier than others. It is important that you find a method that suits you, because missing your energy bill payments or falling into arrears can have severe consequences. They could range from having a negative marker recorded on your credit file, to having your electricity cut off and being summoned to court. It can be scary and overwhelming if you are facing the prospect of not being able to meet all of your financial commitments, and while easier said than done, it is important to stay calm and level-headed. Ignoring any potential financial problems will only exacerbate your situation.

How can a credit line help with utility bills?

Temporary cashflow issues

A cash credit line can help in times of temporary cashflow shortfall. For example, if you had to take a week off sick and your wages were reduced. You can withdraw the funds from your online credit line and make your priority bill payments without worrying you might miss them. Then, once you have adjusted your budget, you can repay the balance when you receive your next full pay, or even make just a minimum payment if your cashflow is not fully rectified yet.

Unexpectedly high bills

Similarly to income shortages, we can experience times where our bills are higher than we predicted for one reason or another. Having instant access to cash through a credit line means you do not have to stress when the bill arrives in your inbox. The flexible repayments allow you to repay the borrowing in a way that suits you, so you do not have to compromise on your other financial responsibilities in order to repay the money you borrowed.

An alternative to short term credit

Payday loans can often be a go-to when it comes to unexpected emergency payments, but it might make more sense to use a credit line than instant payday loans, as payday loans charge higher interest rates, and often you are required to pay over a shorter period which might affect your existing budget. A credit line would allow you to make only minimum payments if your cashflow prevented you from repaying the full balance straightaway, and as the transfers are almost instant, you could pay the bill the same day as receiving it (even if you needed to apply and be approved first).

However, while credit lines and other forms of borrowing can help when you need urgent cash, using credit to pay for things like energy bills if your financial difficulty is long term is only likely to make your issues worse. Every now and then, you might experience higher outgoings than normal, or a small reduction in income and borrowing can help you bridge the gap between paydays. But, as living costs are on the rise in general, it is a good time to review your current budget and borrowing habits to check that your use of credit is sustainable going forward.

The rise in living costs

Borrowing in a time of financial insecurity is always high risk because there is little to no guarantee that you will be able to make the repayments. Missing repayments means negative information being reported to your credit file which makes it harder to obtain credit in the future and could also affect your chances of getting a mobile phone contract, a new energy tariff or even the payment methods available to you when paying your priority bills.

If you know you are only facing a blip in your usually steady finances, then there is unlikely to be any harm in using credit to cover the difference, however if you suspect your blip is a result of the ongoing increases in fuel, food and energy, you should carefully consider if borrowing is a responsible decision. If you are really struggling, you can reach out to free debt advice services who can review your circumstances and provide a detailed plan of action. If you are not sure you need third party help, start by taking a good look at your current spending habits, because you might just need to cut back on a few non-essential purchases for a little while, consider changing service suppliers or cancel any unused subscriptions.

While we cannot control the rate at which our day to day living expenses are rising, we can control how we manage to meet the increased costs, even if that includes reaching out for help.

Managing Cashflow Without Using Credit

Having a small amount of savings is great protection against occasional financial hiccups. You should aim for around £300 as this amount generally covers most unexpected payments like a broken washing machine, new car tyres or even a season ticket for a new job. Of course, some emergency payments can cost a lot more, so try to save as much as you can. Even if you cannot meet the entire payment with your savings alone, the more you have saved, the less you will need to borrow.

Apart from savings, having a good budget is a great way to manage your cashflow. Just knowing exactly how much your priority expenditure is each month can reduce a lot of the stress that comes with managing monthly outgoings. Additionally, review your budget regularly. Are there any subscriptions you no longer use? Is your MOT coming up? When does your insurance renew? Keeping on track with infrequent payments can also decrease your dependency on credit as you will be prepared and may be able to put a bit of cash away in advance.

How to Build a Financial Buffer Between Paychecks

While a credit line is a convenient way to borrow money when you need it, creating lasting money management habits will also help you meet your unexpected payments. Whether it is a nephew’s birthday or a high heating bill in winter, having savings and an accurate budget will increase your ability to manage your cashflow without credit.

What is a financial buffer?

A financial buffer is a small pot of money that sits in your bank account between pay periods. It is separate from your emergency fund. While your emergency fund is designed to cover bigger shocks, such as job loss or major car repairs, a buffer protects you from minor day-to-day cash flow issues, like when your rent, council tax or mortgage payment is due a few days before payday.

Having even a week’s worth of expenses tucked away means you are not left scrambling or relying on credit to get by.

Why it matters

• Peace of mind: You know your regular bills will be covered, even if your income lands later than expected.
• Control over spending: You can stick to your budget without dipping into credit.
• Freedom to plan: Instead of waiting for payday, you can spend money when it is needed.

How to start building a buffer

1. Aim for just one week ahead

Saving for a whole month can be overwhelming. Instead, focus on putting enough money aside to cover a week of food shopping or bills. You can build on this once you have achieved this.

2. Set up small transfers

Make it automatic. Move a little bit into savings every payday, even if it is only £20 or £30. Over time, it builds up. Once you have saved enough, transfer the money back into your main account to act as your buffer.

3. Trim back for a short while

Look at where you can cut back for a while. You can cancel a subscription you do not use, skip a takeaway or hold off on buying clothes. That extra money can kick-start your buffer faster than you think.

4. Use one-off cash boosts

If you get a tax rebate, a bonus or sell something online, put it straight towards your buffer. It is money you were not relying on, so you will not miss it.

5. Keep it handy

This is not like an emergency fund you stash in a separate savings account. A buffer works best sitting in your current account, ready to cover bills when they land. Easy access is the whole point.

How much do you need?

This first step is just a week away. Once that feels comfortable, aim for two weeks, then a full month. Over time, having one month of monthly expenses sitting in your account means you are always paid ahead, no matter how your pay periods fall. It is a simple way to protect yourself, reduce stress and give your budget more flexibility.

Buffer vs emergency fund

It is worth being clear: a financial buffer is not a replacement for your emergency fund. The buffer deals with timing, covering bills and spending money between paydays. Your emergency fund is there for bigger shocks, like losing your income or expensive repairs. Ideally, you will have both, working side by side to give you complete financial stability.

Small habit, big difference

Creating a financial buffer between paychecks is one of those small money habits that makes a big difference. It protects you from late payments, reduces stress and gives you more control over your money.

It does not matter if you are saving £10 a week or £100. The key is progress. Every bit you set aside brings you closer to breaking the paycheck-to-paycheck cycle and building the confidence to reach your bigger financial goals, from paying down debt to saving for a house.

Think of it as the bridge between today and your long-term plans. Start small, stick with it and enjoy the peace of mind that comes from finally getting ahead.

Using Polar Credit to Buy a Phone

Mobile phones are almost vital these days, whether it is confirming that a loved one arrived home safely, checking your work emails, or even taking photos of moments you do not want to forget. Most people own a mobile phone and many use one daily. Despite the fact that phones have become almost a necessity, they can still be very expensive, especially certain smartphones. For those with a limited disposable income, having to buy a new phone can be an unwelcome expense. If you also have a poor credit history, it can be difficult finding a suitable way to pay for it. So, can Polar Credit help you finance a new phone?

How can a credit line help buy a phone?

Credit lines can help you manage larger expenses, like a new phone, by allowing you to spread the cost of your borrowing over a number of months as you need. As long as you make the minimum payment each month, your repayments can be flexible to match your fluctuating budget. This means credit lines can act like a short term line of credit if you know you can repay the money quickly. Plus, an advantage over fixed term loans, is that once you have repaid the funds, you can withdraw them again at your next financial hiccup, so you do not have to apply for new credit each time you need to borrow. Because of the flexible repayment nature of a credit line, it can be a good choice when considering how to spread the cost of expensive items.

Can a credit line help me buy a phone if I have bad credit?

Polar Credit considers people who have a less-than-perfect credit record, which means it can be a great alternative to mainstream credit options if you find you are financially excluded from high street banks’ credit cards and loans. Even if you have had difficulty repaying credit in the past, or you have a thin credit file because you have not borrowed before, you might still be able to access credit to help you with normal expenses like buying a new phone. A credit line application is assessed in the same way other credit is – with affordability and creditworthiness assessments – but credit line lenders have slightly different criteria which means you will not automatically be declined if you have a low credit score.

While a credit line can help you manage cashflow shortfall, it is worth noting that interest is charged for your borrowing which means it is more expensive to use credit than it is to purchase the phone outright with money you have saved up. As well as interest, credit lines usually charge transaction fees for the amount you withdraw. While still much cheaper than payday loans, for example, using any kind of credit is going to cost more than the price of the phone. However, in some cases, borrowing might be your only option, so it is important you compare the different types of credit available so that you find an affordable credit facility that works in your financial circumstances.

Alternative credit for phones

Some of these types of credit might include making the purchase on a credit card, or even using a payday loan or arranged overdraft. There are pros and cons to each type of borrowing so it is important you read up on your options first. You can also often get a phone contract directly with the retailer, though this usually includes your data, texts, and calls so it may be more expensive over the contract term than buying the phone outright to begin with and repaying the credit over a couple of months. You normally need a fairly reputable credit history to get a mobile phone contract as well, so if you are planning to get a new phone in the coming months, you may want to consider how you can improve your credit file – by settling existing debts, closing old credit facilities, and signing up to the electoral register – to widen your available borrowing options.

Borrowing any type of credit comes with financial risks so even if you are certain you can afford the repayments, it is best to do a good check of your budget and upcoming expenses just to make sure. If you can save in advance for a phone, this would be the most sensible option so you can avoid paying interest and charges altogether and be risk-free of missing any repayments which could make it harder to obtain loans and credit in the future.

Student Finance vs Credit Lines

Financing your education can be a challenging decision. But with so many options available, students today have lots of ways to stay afloat while at university. From student loans to credit lines, there is almost too much choice – and it is easy to feel overwhelmed by the options.

However, it is critical that you thoroughly understand your options before you decide. Without research, you may accidentally sign up for a loan or another form of credit that you cannot afford to pay back. We are looking at student loans vs credit lines to clarify the difference between these popular options.

What are student loans?

In the UK, students must cover their tuition fees and general living expenses. Typically, tuition fees alone cost up to £9,790 per year and this does not cover field trips, IT equipment, textbooks, course materials, travel costs and other non-essential course expenses.

Students can apply for Tuition Fee Loans to cover the cost of the course. These are provided by a student finance-specific lender and are sent straight from the company to your university.

You can also apply for a Maintenance Loan, which covers your living expenses while you study. The amount you are eligible for depends on where you live, when your course starts and your household income.

Can students use credit lines?

Unlike credit cards, when you withdraw cash, it goes into your bank account, meaning you can make bank transfer payments and pay direct debits. This is great for covering university living costs, but not overall course fees.

Credit lines can accept applications from students, but you also need to be in part time employment and their criteria for accepting you will involve a credit check. Depending on your credit history, the size of your credit line might be capped at a lower amount.

Key differences between student finance and credit lines

Here are the key differences between the two finance options:

• Student loan debt is written off 40 years after your first payment and does not affect your credit score.
• Missed credit line repayments can result in a lower credit score, lead to extra interest and charges and potential legal action or debt collectors.
• Credit line cash can be drawn straight into your bank.
• Student finance (for tuition fees) does not go straight into your account. But Maintenance Loan cash does.
• Your student finance loan depends on your household income. In contrast, your credit line amount depends on your own affordability and creditworthiness.

Staying aware of credit debt

If you do not do your research, you may end up in debt due to charges, fees, interest and late payments. You must only borrow as much as you know you can afford to repay. However, if you have noticed you are in persistent debt, a debt charity like StepChange can help you with free budgeting advice.

There is no right or wrong way to finance yourself at university. However, you can find the best route for your finances by researching before deciding. If in doubt, talk to a professional for personal advice.

Can I use a credit line to do my Christmas shopping?

In the months leading up to Christmas, the smooth, everyday running of your finances can be temporarily interrupted. Doing a huge food shop for all the family or buying presents for the children does not come cheap and sometimes the stress of your financial circumstances throughout the festive period can make the whole time much less enjoyable. While it can be tempting to borrow money to help see you through, it is not always a good idea. Normally, you should only be borrowing money in emergency situations and when you know you can afford to repay it.

Despite this, spreading the cost of your finances over Christmas by using low-cost credit can be a sensible option if it means you can maintain all your current financial commitments. There are several ways of doing this:

• 0% credit cards
• 0% overdrafts
• Saving up throughout the year
• Using points on supermarket loyalty cards

Ultimately, we would not encourage the use of your credit line to do your Christmas shopping. You should try to save up throughout the year so that you are spending money you have earned rather than borrowing money. If you do need credit to see you through, try to find the cheapest possible way of borrowing because the last thing you need after Christmas is a huge bill in January.

Ideally credit lines are a safety net for when things go wrong and they are not an extension of your income. Of course, you know your financial circumstances and your ability to meet your repayments so how you choose to spend your credit line funds is entirely up to you. Just make sure you do a comprehensive budget for the next few months and you include all your planned priority bills and annual payments before calculating if you can afford to take out credit. Missing your repayments can cause serious money problems and not even Christmas is worth long-term financial difficulty.

How Polar Credit can Help with a Variable Income

There are several occasions in life where you may experience a shortfall in cash. But what if you experience temporary shortfalls more frequently because the nature of your work means you do not have a steady income?

Most months, you will probably be able to meet all of your financial commitments without any issues. But if you are self-employed or a large part of your income is down to seasonal work, there can be a few times where you find your paycheck just is not quite enough.

The Polar Credit Line is a product that can help you meet your financial needs without costing a fortune. This credit facility means you do not have to make a new application every time you need to borrow a little bit of cash and you will be rewarded for your loyalty and for using the credit product sustainably.

Flexibility

The Polar Credit Line is designed to be flexible so that you can borrow money when you need to and pay it back as and when it suits your financial circumstances. We understand that it is not always convenient to repay your full balance every month, but similarly, we understand that you might wish to repay the balance in full and not borrow for a couple of months. With Polar Credit, there is no pressure to continue to withdraw funds if you do not need them, and there is no pressure to repay the money borrowed in full if you cannot afford it – although you should note that only making your minimum payment each month will take you longer to repay the balance.

Customer loyalty

Something a lot of brands fail to recognise these days is customer loyalty. This is why we wanted to make sure that we rewarded our customers for using their Polar Credit line sustainably – it is part of our commitment to financial sustainability. After your 1 year anniversary with us, we will reduce your interest rate by 10% pa. This means, the amount of interest that accrues on your withdrawn balance will be smaller, so your overall repayments will also be smaller.

Then after that, every 6 months you borrow with us responsibly, we will reduce your interest by 5% pa until you reach our minimum 29.9% pa – which is roughly in line with mainstream credit cards. So, even if you have a bad credit history, you can still work towards accessing a low interest credit product while still meeting your financial commitments and borrowing on the odd occasion you might need to.

As well as reducing your interest rate, we also monitor your activity with us and will review your account every 6 months to see if you are eligible for a credit limit increase – or similarly, a credit limit decrease if desired. This is because we recognise that over time, your financial commitments may increase, and having access to a larger amount of credit can help relieve some of the stress that comes with applying for large loans.

What is the Best Way to Use a Credit Line?

Having access to credit can massively improve your ability to manage money. Instead of missing important bills that do not line up with your payday on occasion, you can be confident that you can meet all of your financial commitments on time, just by borrowing a small amount of cash when you need to. While you should never rely on credit as a secondary source of income, occasional use for sensible purposes is going to be a responsible way to borrow.

While it is best to reserve using credit for emergency expenses, a credit line has a lower rate of interest than a payday loan, for example, so you can use it to support other payments and more general cashflow when you need to.

Using your credit line responsibly

• Always pay more than the minimum payment where possible
• Only borrow the amount that you need
• Borrow at the time you need the money, not too far in advance
• Check your statement end date and minimum payment date if you are unsure
• Check your card details are up to date

Always pay more than the minimum payment where possible

While you are only required to make a minimum payment each month (as is the same with most credit cards), only paying the minimum payment will take you much longer to repay the full balance. As interest accrues on the outstanding principal, it also means you will end up repaying more. Even if you cannot afford to repay the full balance some months, try to make additional repayments where possible to reduce the total amount that you owe. This will also increase the credit available to withdraw in case of emergency or unexpected payments.

Only borrow the amount you need

Interest is charged on the amount that you withdraw, so if you only need to borrow £100 to meet a payment, do not withdraw more than this. Interest is calculated as a percentage, and so the larger the amount that you withdraw, the more you will have to repay at the end of your statement period.

Borrow at the time you need the money, not too far in advance

Withdrawn funds are transferred to your bank account instantly, even on weekends and bank holidays, so there is no need to withdraw the money you need days or even a week in advance. You are only charged interest on the amount you have withdrawn over the time it is withdrawn for, so the less time you borrow from your credit line, the less interest you will have to repay.

Check your statement end date and minimum payment date if you are unsure

Not making your repayments on time can lead to default fees and missed payments being recorded on your credit file. It is important you actively try to improve your credit file where you can because it has a big influence on your future applications for credit. Checking when your payments are due can help to ensure you stay on track and meet all of your repayments on time. If your payday changes at work or you change jobs, get in touch with your creditors as soon as possible so they can amend your repayment date. If you are paid four-weekly and your minimum payment date is on a set date each month, it can be trickier to ensure you have the funds available to meet your financial commitments. It can be a good idea to open a separate bank account to allocate funds when you get paid, so you know you have the money to meet your repayments on time.

Check your card details are up to date

Most lenders will collect your repayments from a registered debit card or by direct debit using your bank account details. If you get a new card or switch bank accounts, you may need to update the details on your account so that your lender can continue to collect the repayments automatically. It is always your responsibility to ensure your repayments are made on time, and it is unlikely lenders will waive late fees or missed payment markers on your credit file because you forgot to change your payment details.

In Summary

Try to reserve your credit for emergency or urgent purposes – such as car repairs, replacing broken furniture or even down payments on new rented property – but if you do want to use credit for less essential reasons, then try to use the lowest interest rate credit available, and only borrow the exact amount you need. There is no point taking out a £10,000 bank loan at a low APR if you only need to borrow £200. A credit line is a reasonable credit option for people with bad credit needing access to relatively small sums of cash, quickly, subject to a successful application.

Whatever type of credit you use, the key to borrowing responsibly is to make considered decisions. Everyone has different financial circumstances so there is no one-rule-fits-all when it comes to using credit. Finding a budget and money management plan that works for you is important and there is no shame in trying a few different methods before finding one that makes handling your finances easier and less stressful.

More Information

Borrowing money

Difference between credit cards and credit lines

Credit line vs payday loan

Looking for something else? Check out the Polar Credit Info Hub.