Are Personal Lines of Credit Worth It?


There are many ways that individuals can get money for their various wants and needs, even when they do not have it available. You can take out a credit card and get an advance payment. You can get a personal loan from a bank, payday lender, or a peer-to-peer credit network. Or they can go to their bank and get a line of credit. Are personal credit lines worth it? What is a line of credit? Do you need this personal line of credit? Read more on this blog to find out more about it.

Most people don’t use lines of credit in everyday life. However, a line of credit is a tool that you can use to get cash for things like home renovations, car repairs, or even family vacations. What is a personal credit line, how do you get one and how do they work?

What are personal credit lines?

A personal line of credit is a type of loan from a financial institution that provides you with a specific amount that you can access when you need it.

They differ from Home Equity Lines of Credit (HELOCs) in that most personal lines of credit are not secured by any kind of asset. As a result, personal LOCs have higher interest rates than HELOCs and other secured lines of credit.

To get one, simply go to your bank or credit union and apply for one. You may be able to qualify for one depending on your income, creditworthiness, debt to income ratio, and balance outstanding. The limits can vary widely. So ask what do you qualify for!

How does a line of credit (LOC) work?

These types of lines of credit don’t work like most loans. Instead, they are more like credit cards. Lines of credit are sources of funding that a person can dive into at any time. To get access to these funds, you can ask your bank or see if you can access them through online banking.

When you take money on a line of credit or charge a purchase, you accrue interest immediately on that purchase. At the end of the period, you will receive an invoice with a minimum payment and a due date. You always have the option to pay off the LOC. In this way, they work much like credit cards.

Which is Better: Personal Line of Credit or Credit Card?

Personal LOCs tend to have lower interest rates than credit cards and are often between 7 and 15% versus credit cards between 14 and 23%. In addition, personal LOCs often offer larger credits.

However, unlike credit cards, personal LOCs are not bundled with benefits and interest accrues once a purchase is made. Credit cards have a grace period and interest is paid after this period, so borrowers can never pay a cent of interest when using a credit card.

Are personal credit lines worth it?

We recommend creating a personal LOC and using it very sparingly. Having a LOC gives you more credit available which improves your credit score. However, the interest rates can be high. We therefore recommend that you only use it for essential instant purchases that you cannot charge with a credit card.

In summary, personal credit lines are a great addition to your credit mix and can be used in many different situations.


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Are personal credit lines worth it?


Are personal credit lines worth it? What is a line of credit? Do you need this personal line of credit? Read more on this blog to find out more about it.


Jason M. Kaplan, Esq.

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The credit professionals

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Are Personal Lines of Credit Worth It?

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