Personal Line of Credit

Having a personal line of credit can help in times of crisis and ensure you remain solvent in dire circumstances. In many cases, banks will give an individual an unsecured line of credit linked to the bank account held with them. This allows an individual access to extra funds and allows the bank to monitor the situation much closer than with credit cards. Although the system works very much like credit cards, the interest rate is usually lower. This extra amount of funds in addition to the usual deposits placed in a bank account can be used at will whenever the need arises and it works in a similar way to an overdraft facility. An individual will have to be approved by a bank for a personal line of credit and the personal line of credit will be set and limited by the bank based on a number of factors including credit history, employment, number of regular deposits and other criteria.

No security necessary
One of the advantages of a personal line of credit is that this kind of extra fund, or loan, is not secured on a house or other collateral. Therefore, if non-payment of the loan occurs, you cannot be evicted or ousted from your property, whereas a secured loan is generally secured against a property or other valuable asset that can be used as payment in the event of non-payment of the loan. This is how so many people have got into financial difficulties and lost their homes in recent years.

With the rise of unemployment and paychecks not meeting the essential payments individuals have had to look at alternatives which have included loans secured on their houses. Unfortunately as the situation remained in decline, they had no ways of making the payments and banks have been allowed to take houses, sell them and take their cut to repay the debt. If you need to get a loan for any reason; always ensure it is an unsecured loan, this means that whatever happens, you will still have your home and the bank will not be able to force you to sell it.

Revolving personal line of credit
A revolving personal line of credit allows the balance of the credit to fluctuate and so no fixed payment is made. This flexibility can be a real benefit, especially to small business that experience lean times part of the year and more income in another quarter of the year. Therefore, paying off the full amount when money is flowing and paying a minimum amount which just covers the interest and a little of the principal amount when times are lean can be so helpful.

What can I use person lines of credit for?
The advantage of personal lines of credit is that it can be used for pretty much anything you want; a new car or boat or to purchase essential items like a new bathroom or even for paying bills. You can of course choose a bank loan or a payday loan to make these kinds of payments but there are certain disadvantages to that. The bank loan will have a fixed payment to be paid monthly, or the full amount may be due if it is a payday loan. Therefore, if you are expecting an influx of money in a few months’ time, you could experience much more flexibility and monetary freedom with a personal line of credit.

However, regardless of the amount in your possession, you would have to pay the full monthly amount of a bank loan each and every month as agreed. The personal line of credit is a more flexible system of addressing financial unpredictability. All things considered, do be responsible and never take on more than you can comfortably pay back for any type of loan facilities.