Credit is so widely used that almost every adult in the UK has, at some point in their lives, borrowed money. We think of credit as a modern concept, but it actually dates back almost 300 years and has grown in popularity, usefulness, and accessibility ever since. The first use of credit was an early form of an overdraft, granted in the UK by the Royal Bank of Scotland. Although only accessible to the wealthy and upper classes of society at the time, this was the start of a new era for how people managed money.
It then took until 1950 for the first credit card to be created. When we think of how quickly technology advances now, it’s hard to imagine it took over two centuries to establish what is widely regarded as the most common use of credit.
Since then, new products and services have joined the financial market, each making use of the latest technology. In fact, there is a category of companies called ‘fintechs’ which combine finance and technology for consumer benefit. Some fintechs are standalone companies and some offer their services to be imbedded in another business. For example, a large incumbent bank might outsource their mobile app developments to a fintech firm, because they don’t have sufficient resources or knowledge to create the service themselves. This is because the technology is changing so quickly, and it takes experts and professionals to keep up.
When it comes to credit, having the latest technology doesn’t mean sending money in a flying a car. It can simply mean that a firm has the means to create a product to meet consumer demands. One of the newer forms of credit to join the market, attempting to fill the gap between mainstream credit and alternative borrowing like payday loans, is the credit line.
The credit line is so new, that unlike overdrafts, its history spans not even a decade. In fact, it’s quite hard to pinpoint the creation of the credit line. In the UK, the first credit lines started to appear between 2016 and 2019 and they are slowly growing in popularity as consumers appreciate the flexibility of the product.
Commonly, people turned to credit cards, overdrafts, and payday loans to manage everyday expenses and sudden cashflow shortfalls. In order to provide a service which combines the accessibility of payday loans, with the practicality of an overdraft and the flexibility of credit cards, the credit line was created.
Available to consumers with less than perfect credit scores, a credit line means people can access credit even if they have a poor credit history, and they can borrow at a much cheaper rate than payday loans which typically was their only option.
As a new product, we may still see some development of the credit line as we move forwards, but currently it provides a strong alternative to mainstream credit for people looking to borrow with a bad credit score, or perhaps just someone who fancies using a simple credit product.
Not to be confused with a line of credit, which is a general term governing almost all revolving credit, a credit line makes managing cashflow simpler, by allowing you to withdraw funds into your bank account to manage your money from one central point. You can withdraw money up to your credit limit, and you only need to make a minimum payment each month if you cannot afford to repay in full that month. The credit line makes use of fast and safe transfer technologies, so you can access the cash within minutes.
Like all credit products, you have to submit an application for a credit line. Usually, credit line providers are online lenders, and the applications are online too. This makes applying for a credit line quick, easy, and accessible from almost any location – as long as you have internet access. If your application is approved, you’ll be granted a credit limit and you can then withdraw as much of the credit limit as you need to manage your cashflow effectively.
You will be required to make at least a minimum payment at the end of your statement period, although it is advised to always repay as much of your borrowing as you can afford. The credit line is a revolving credit product, so you don’t need to submit a new application every time you need to borrow money.
There are plenty of benefits to credit lines, including (but not limited to!):
Although credit lines are accessible to people with bad credit, it doesn’t mean you have to apply if you have a poor credit history. Borrowing must always be a considered decision, because failing to make your repayments could result in serious financial difficulties.
A credit line allows you to feel a sense of financial security when things go wrong due to the availability of credit when you need it. While the history of credit lines is short, there’s no doubt that it is a useful credit service allowing people to manage their finances, meet unexpected payments and perhaps even treat themselves from time to time.
From information about credit products to money management guides, our Info Hub is full of informative finance articles.