Line of Credit handy when you need quick extra cash to get things done
Credit line enables purchases for new home, car, renovations, vacation or just pure fun
A line of credit is not a loan, but more along the lines of money sitting in an account, you can use, but you must repay it. A line of credit is not free money; you will be charged interest on that account. A credit line can be obtained from a department store, grocery store, farm market, but most often, lines of credit will be obtained from a bank or other type of financial institution.
<h3>Where to look for a line of credit</h3>
In this article, we are going to discuss a bank credit line, one that you use for business or for your home needs. Lines of credit can be just a few thousand dollars, to a million or more dollars depending on your income, and your needs. A line of credit could be secure or unsecured.
<h3>Unsecured credit line</h3>
The unsecured credit line is based on your credit worthiness. You have made your payments on time for other loans, and you have little or no other problems financially. A credit line can be used in small amounts or all at one time. Payments are set monthly, so you can make interest only payments, or you can pay off the credit line as you have more money available.
<h3>Secured credit line</h3>
Secured credit lines use one of your assets to secure the line of credit. If you don’t make your payments, if you don’t repay the money on this line of credit, the bank or financial institution is going to take that asset from you. For example, a secured line of credit used to make home repairs often will be secured by your home. if you borrow $10,000 to put siding on your home, and you don’t repay the loan, you can lose the house to the bank. You want to be careful and make the payments, so you do not fall into default on a line of credit that is secure.
<h3>Steps to obtaining a line of credit</h3>
Visit with the bank or financial institution where you do your banking. Talk with a loan officer about how to set up a line of credit. Often times, you will need three months of tax returns, a statement of how you will use the money, what you are offering as security, and if you are doing business, you will need financial statements from the business about the income, assets and liabilities of the business.
<h3>How to best use a line of credit</h3>
A line of credit is based on your credit worthiness. If you do not have many assets, it can be difficult to get a line of credit if you have bad credit. To use a line of credit, you will be given checks or a passbook so you can access this online money. With the technology available today, you can often access credit lines through online banking as well. Using a credit line requires you to take money from that line of credit, and then pay back the money.
For example: if you were to borrow $20,000, and then make payments of $5,000 a month, your credit worthiness will remain high. If you were to borrow $20,000 and then make payments of $100 per month, your credit rating will be lower. Make higher payments to increase your credit worthiness so you will be eligible for higher lines of credit in the future.