Discovering a new way to borrow can feel like a dream when it’s exactly the type of credit you’ve been looking for. Equally though, it can feel overwhelming as there is such a range of choice it can be difficult to know which credit facility is the best for you. A relatively recent addition to the consumer lending market is the cash credit line; a flexible way to borrow on a revolving basis. It can act like a short term loan, helping you out in times of temporary cashflow shortfall, or it could help you spread the cost of a larger, planned expense, like a credit card does.
As a credit line is a type of running account borrowing service, it’s not technically a loan. A loan has a fixed-term duration, and you only receive the funds once throughout the loan term (at the start). A running account or revolving credit product has no fixed-term, so it continues from month to month unless you or the lender ends the agreement.
You can borrow as many times as you need to, up to your credit limit. This means if your credit limit was £1000, you could withdraw £200 every month for five months (as long as your account repayments stay up to date). While the credit is continually accessible, credit lines must be treated like any other type of credit and must not be used as a secondary source of income or to repay other debts. It’s sometimes easy to think that borrowing money is the right solution, but in some cases, it could actually lead to increased financial difficulty.
Credit line lenders run an online service so you can apply from wherever you are. Most lenders, including Polar Credit, use automated algorithms to review your application, so you can apply any time of the day and any day of the week, and still get your lending decision instantly. The application form usually takes no more than ten minutes to complete, and will be subject to affordability and creditworthiness assessments, often including a hard search of your credit file.
If your application is approved, you will be able to withdraw the funds up to your credit limit straightaway making it a simple way to get money quickly if you’re facing a cashflow issue. If you don’t need the funds just yet, you don’t need to withdraw them immediately as they’ll remain available to withdraw any time. As long as your bank supports the Faster Payments Service (FPS), the money should arrive in your bank account within minutes after withdrawing.
You will receive a statement at the end of each statement period which will tell you how much your minimum payment is and your total balance if you were to repay in full. The minimum payments at Polar Credit are made up of the transaction fees, interest that accrued on your outstanding capital during your statement period, and the higher of either £10 or 5% of the currently outstanding capital. This means that if you don’t borrow any money from your credit line, you won’t have to make any repayments.
Over time, you may be able to increase or decrease your credit limit in line with your circumstances. Usually, you have to go through another affordability assessment if you want to increase your credit limit as your repayments will also increase if you withdraw the funds and lenders want to make sure the new repayments will still be affordable. You should be able to decrease your limit at any time.
If you miss your repayments regularly or leave your account overdue for an extended period of time, your lender might restrict any further access to credit, so you should try to make at least your minimum payments on time to stay within the terms of your agreement. If something does come up preventing you from making the repayment, contact your lender as soon as possible.
It’s never really possible to objectively decide whether one type of credit is better than another. Borrowing depends entirely on your circumstances and your ability to budget and make repayments on time. While you would never take out credit with the intention of not repaying it, sometimes your lifestyle or external circumstances can make it tricky to maintain certain financial commitments. For example, if you have a variable income, you might find it hard to stick to fixed-term loan repayments as there is no flexibility in the amount that is due each month. You may therefore prefer a credit line or a credit card, where you have the option to make only a minimum payment if you can’t afford to repay the full balance, or at least a sizeable portion, one month. On the other hand, if you know you can be tempted to overspend from time to time, then having continual access to credit could encourage those spending habits and might leave you unable to meet your financial responsibilities. Therefore, a loan might be more suitable as you receive the funds only once to meet your unexpected expense, and then you can include the repayments in your budget under essential expenditure.
The main thing to consider is whether you really need to borrow, and whether you can realistically afford the repayments before applying for any type of credit.
How can Polar Credit help with a variable income?
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.