Things to Remember While Going for Line of Credit Loans
Tips To Know When You Decide To Use Personal Short-term Lines Of Credit
Did you know there actually is another option for quick short-term financing along with payday loans, title loans and installment loans? All of those three loan types are good options in their own way, but a personal line of credit might be an even better one if you're in a situation where you may need to borrow money more than once. A line of credit is a bit different than a regular loan and actually could be less burdensome financially if you use it properly. But you need to be aware of all the terms when you apply for a line of credit and make sure you keep the balance paid down. Here are a few tips to keep in mind when using a line of credit.
A Short-term Line Of Credit Should Not Be Treated Like A Credit Card
A line of credit and a credit card essentially have the same kind of structure. In both cases, you only have to use as much of your credit limit as you need for a particular payment or for multiple payments, and you only need to repay the principal and interest on the amount you used. But a short-term line of credit often has a substantially higher APR than a credit card, so you should only use it when you really need it, and when you know that you can get your balance paid off quickly. Even though you only need to apply for a short-term line of credit once and can keep it open for as long as you want, you should focus more on building your cash savings rather than using it.
Be Aware Of The Time It Might Take To Withdraw Funds From Your Line Of Credit
One of the benefits of using short-term line of credit loans to pay for bills or fees that have hard deadlines is that you can usually count on getting your funds very quickly with same day transfers in some cases. But sometimes when you request a withdrawal amount it may take up to 24 hours to appear in your bank account, or potentially even longer if your request is made over the weekend. This all depends on how fast your bank is with its fund transfer process. You might be able to request a wire transfer of your funds to your bank account, but the cost to do so is often not worth it. Just remember it's best to request your needed funds at least a day before the payment that you're using them for is due.
Make Sure You Have A Working Checking Account That Isn't Currently Flagged By Your Bank
Most lenders who offer line of credit products will want proof that you have a checking account and that you're able to use it without it getting frozen. If you've had problems with bouncing checks, getting NSF notifications on automatic withdrawals, or gotten in trouble with overdrafts, you may have trouble getting approved for a line of credit. You also want to make sure your payment dates are scheduled for a time that corresponds with receiving your paycheck or having it direct deposited so that you will not be charged any bank fees for NSF when the lender initiates a withdrawal.
Always Pay More Than The Minimum Amount Due When Making A Payment
Usually a line of credit will allow you to make a full payment on the balance you've used including accrued interest, or you can make the minimum payment which is usually a portion of your outstanding balance. It's often better to pay off the whole balance that you owe by the due date so that interest charges stop immediately and your full credit limit is available again. But if you can't pay the full balance due, you should at least pay more than the minimum amount due to keep your interest and principal payments as low as possible. Remember that most short-term lines of credit have interest that adds up per day, so the longer you wait to pay off your amount due, the more it will eat into your credit limit and possibly exceed it. You'll need to make sure you understand the lender's payment terms fully before you sign any loan agreements or agree to automatic payments.