WHAT IS A LINE OF CREDIT?

When borrowing money from a bank, a line of credit is one of the more popular methods. Similar to how a credit card works, with a line of credit you are borrowing against a credit limit. You access your line of credit by writing a check for the amount that you need to borrow. The main difference is that unlike with credit cards, the total balance of a line of credit is due to be paid in full at the end of the loan term. Typical terms for the lines of credit we offer range from 1-6 years.

Attributes of a Unsecured Line of Credit
There is a credit limit associated with a line of credit. This limit is the most amount of money you can utilize against your credit line at any given time.

There are two 'periods' associated with a line of credit: the draw and payback periods. You are able to borrow the money you need (against your credit line) during the draw period and are only mandated to pay the interest or whatever minimum payment your lender establishes.

During the payback period, you are no longer able to borrow against your credit line and will be required to make payment on interest + principal on the amount that you have borrowed.

Read the Fine Print!
Before signing any paperwork associated with a line of credit, make sure you understand when your draw period ends and when you are going to be required to re-pay your total loan. Your contract will also state whether or not you will have the option of being able to extend your draw period, or if you will be required to immediately pay your balance in full or if you can pay over time.

Similar to standard personal loans and credit cards, a line of credit has an interest rate associated with it. The interest rate of a line of credit is usually a variable rate that will change every month. Lines of credit usually have lower rates than those of fixed-rate loans.


Personal Loan Tips
Pros and Cons of a Line of Credit - Find out if a line of credit is the best option for your needs.
Line of Credit Vs. Credit Cards
Line of Credit vs. Lump Sum

 

 



 

 


 

 

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