Looking for ways to borrow can become tiresome if you don’t know where to look or even what you’re looking for. You can’t always assume that the first credit facility you come across is the best one, and you can’t disregard credit options just because you haven’t heard of them before. It can be overwhelming and add unnecessary stress to an already difficult situation.
Firstly, what is a line of credit? A line of credit is a generic term for any kind of revolving credit facility. The concept is fairly straightforward: you have consistent access to credit, up to a specified limit, and you can use as much or as little of the funds as you need to. You typically have to make a payment at the end of each statement period (usually every month), and in some cases, you might only have to make a partial repayment, known as a minimum payment. There are various lines of credit on the market at the moment, and they all operate in different ways to offer consumers the widest range of options so you can find a way to borrow to fit your financial and personal circumstances. Most lenders offer an unsecured personal line of credit, but it is possible to get business lines of credit as well. Lines of credit often charge interest, but some may also apply transaction fees or daily charges for your borrowing.
As the name might suggest, a credit line is a type of line of credit. Credit lines are a fairly new way to borrow and offer an online account which you can withdraw funds from into your bank account. The transfers are usually instantaneous, and you have to make at least a minimum payment each statement period to keep your account up to date. You can apply online, and the applications are typically automatically reviewed so you get a lending decision straightaway. Once you’ve been approved, you can withdraw the funds into your bank account immediately to resolve any cashflow shortfall or emergency expenses.
Credit cards are a very common way to borrow and normally involve using a plastic card, or card details, to make a purchase which you then repay at the end of your statement period. Some credit cards also offer balance transfer options, which means you can transfer the balance from one credit card to another. Usually, this is so you can take advantage of cheaper interest rates. Credit cards also require a minimum payment each month, though you will be charged more interest and it does take longer to repay the balance if you only ever make minimum payments. Most providers allow you to apply online for credit cards, and some have automated review processes so you can find out if you’ve been approved fairly quickly. You then have to wait for the card and your pin number to arrive in the post before you can start to use the credit.
Overdrafts are another very common borrowing option and most people have some form of an arranged overdraft attached to their current account. Overdraft limits can vary from £50 into the thousands and the limit is agreed with your bank. If you spend more than your arranged overdraft, you enter an unarranged overdraft which can incur additional fees and charges. You repay your overdraft when you pay money into the bank account. Your bank will usually give you a specific date each month that the funds have to be repaid by, in the same way you receive a statement for a credit card or credit line.
If you’ve decided that a revolving credit facility would help you out either in the short term or as a reassurance option in case of future mishaps, there are various ways you can apply for a line of credit.
As well as being able to get a loan online, most lines of credit are also available online 24/7. Lenders know the importance of offering an accessible service and they understand that not everyone’s daily routine is the same. If you work nights, for example, you might struggle to find time during the day to apply for credit. Therefore, having a service you can access any time of the day means you aren’t financially excluded when cashflow becomes an issue. Plus, being able to apply online means it doesn’t matter where you are or how much time you have as you can access the application from a smartphone or computer, and it usually takes only minutes to complete.
Some line of credit lenders also have branches you can visit or even a telephone service to apply for credit or increase your existing line of credit for example. Depending on when you need the money and your computer literacy, you may prefer to speak to someone in-branch before opening a new line of credit.
Wherever you find a line a credit, before you apply, it’s important to consider how the repayments will affect your budget and your current money management. Taking on additional financial responsibilities is not a decision that should be taken lightly. Defaulting on your repayments can cause you serious money trouble and make credit harder to obtain in the future. While a line of credit can help you in times of financial difficulty, it can also make things worse if you borrow irresponsibly.
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