&Solved offers a line of credit to eligible applicants. A line of credit is a loan alternative when a moderate amount of fund is required for any expense that might come up. The procedure is simple, straightforward and takes just a few days. Let’s take a closer look at how a line of credit compares to other forms of loan alternatives.
Compare line of credit
Line of credit vs home equity line of credit:
A line of credit is an unsecured line of credit, or in other words, no collateral needs to be presented to be eligible for it. On the other hand, a home equity line of credit is a secured line of credit where equity of your home is offered as collateral. To be able to apply for the latter, you must be a homeowner who has paid off at least some amount of your mortgage loan so that you own some equity in your home.
Line of credit vs mortgage:
A mortgage is very specifically the loan amount given to you by a bank or lending agency to buy a house. A line of credit does not require you to invest the money in buying a house. The mortgage is a lump sum loaned to you which you need to pay back with interest over a fixed time. A line of credit is revolving credit of which you can withdraw only what you require when you need it and pay back only the borrowed amount with interest.
Line of credit vs credit card:
A line of credit is similar to a credit card in that they are both revolving lines of credit. However, a line of credit usually gives you a higher credit amount than that of a credit card. The rate of interest on a line of credit can be lower than that of a credit card. You don’t have any cash advance fees on your line of Credit. Credit cards give you the option to earn reward points; this feature is not available for a line of credit.
Line of credit vs home equity loan:
To be able to take out a home equity loan, you have to first and foremost own at least part of your home if not all of it. For example, if you are still paying the mortgage on your home, then your equity on which you can take a loan is the amount that you have already paid in the mortgage. An unsecured line of credit does not require you to own a home before you can apply for it. A home equity loan is a high risk to you while a line of credit comes with a much lower risk. The amount that can be borrowed on a home equity loan will depend on the value of your equity.
Line of credit vs loan:
A loan is a lump sum that is paid all at once to the applicant. A line of credit is a revolving credit that is held in reserve for the applicant. When you are granted a home loan, you need to start paying back the whole amount of the loan and the interest within the duration of the loan. With a line of credit, you only pay back the amount and interest of the amount you have borrowed. No interest is levied on the amount that remains in reserve and has not been withdrawn. A line of credit is long term and only requires one application. A loan generally needs to be paid back in an agreed period of time and once paid the account is closed so you will need to submit a new application for any additional funds.
Line of credit vs term loan:
The big difference between a line of credit and term loan is the interest rate of late payments. With a line of credit, the original interest rate might be low but can increase considerably if a payment is late. A term loan has a higher rate of interest, to begin with, but this remains fixed throughout the duration of the loan even in case of late payments.
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