There are times in life when a financial boost could come in handy, whether it’s for a home renovation, emergency medical expense, auto repair, or even when your personal business’s operating expenses are increasing, and funds are running low.
A personal line of credit could be your ticket to tackle significant costs, however, the power of “on-demand” money that comes with a line of credit can be very alluring, and not knowing the correct steps can cause you to rush into it and risk getting denied. Luckily, &Solved makes it easy. Before you begin your application, check out these five essential things you should know before applying for a line of credit.
1. A Line of Credit vs. Bank Loan
Both a traditional bank loan and a line of credit allow individuals and businesses to borrow money to pay for nearly anything. However, the differentiating factor between the two comes with how you receive your money and the process on which you pay it back. A loan is issued primarily as one lump sum of cash that is repaid across a fixed term. But, a line of credit allows any borrower to withdraw, repay, and redraw again from available funds.
While both are great options for a one-time investment or purchase, lines of credit allow for ongoing expenses such as home remodelling costs or evening out cash flow for small business owners.
2. What Can I Use My Line of Credit on?
Personal LOCs can be put toward practically anything, but home improvement projects are usually the most common and practical reasons for taking out a line of credit. For business owners, opening a line of credit can unlock several opportunities for growth. Many business owners use lines of credit as a way to fund their advertising campaigns and marketing efforts.
Whatever you plan to use your loan for, you should always keep a bulletproof repayment strategy in mind.
3. Your Credit Score.
Your credit score is the first thing we use to determine your line of credit. Many factors go into your score but simply put: The higher the number, the better the score. Having a high credit score demonstrates that you do not pose banks a risk when issuing you a LOC. Things that increase your score include: paying bills on time, having a steady stream of income, maintaining a savings account, and not defaulting on loans you may already have.
If your score isn’t as high as you had hoped, we’ll work with you to find the right amount and interest rate to borrow at. At &Solved we offer numerous LOC plans for any score!
4. Employment & Personal Finances
Maintaining proper employment with a steady stream of income is the second most important piece for opening a line of credit. Don’t fret; we don’t need a detailed explanation of what you do, just the basics! Your employer’s name and number, your occupation, and how long you’ve been working with them are more than enough to get started.
Having your employment information, personal income information, and a valid driver’s license that states you are at least 21 years of age, are crucial (and often overlooked) pieces needed for the process. Before you apply, take a second and make sure you have all of your up-to-date information.
5. How Much Should You Borrow?
Determining how much you choose to borrow is mainly dependent on what you need your LOC for and how high your credit score is.
Should you have the luxury of a flexible line of credit, you should consider coming up with a solid strategy to make repayments. Falling behind on payments will not only set you back financially but will harm your overall credit score. Periodically paying down your balance will show your lender you do not pose a risk and that you can leverage the value and flexibility of a line of credit.
If you’re a business owner, using a LOC to cover operating costs is not a good option. Again, think strategically about your financial needs and your ability to repay to determine the best amount to open for a LOC.
Opening a line of credit is perfect for individuals or businesses that face multiple large costs over the span of several years. The high interest rates of loans and credit cards tend to be riskier for large purchases that cannot be repaid on time.
If you’re ready for a Line of Credit, head over to our application and get approved in no time. Alternatively, you can contact us and speak to one of our consultants for more information about applying for a Line of Credit with &Solved.