Sometimes we could all use some extra cash. Whether it’s for a home extension, plan a wedding, in case of an emergency or some other worthwhile purpose it’s good to have a sum of money available. But for most of us, extra cash on demand is not always easy to come by. A Line of Credit provides those funds when required and is paid back from 2.5% per month. Here’s how it works: –
How it works (1,2,3!)
Step 1 Get a credit level
You provide your details and the &Solved team assess their information to give you a credit level between $3,000 and $30,000 depending on your income, expenses and credit history. It’s usually done within 24 hours and there are no fees for applicants with a Diamond Credit Profile.
Step 2 Receive Funds
Once your application has been approved, you can withdraw money up to your Credit Level at any time. The minimum first drawdown is $3,000, thereafter a minimum of $1,000 each time. You decide how much you want to draw out and when you want it, and it is deposited into your bank account, usually within 24 hours. There is no cash advance fee.
Step 2 Pay quicker & save
The interest rate is assessed on your income, expenses and credit history and is charged only on the actual amount owing. We agree in writing the interest rate at the start and there are no penalties, for paying early or in full. Anything paid today doesn’t get charged interest tomorrow.
What is a line of credit?
A line of credit is a fixed amount that a bank or lending agency sees fit to let you borrow as and when you require it. Here are the features of a line of credit:
- The upper limit of the amount is pre-set.
- You can borrow as much or as little money as you want at any time within the pre-set limit.
- You only need to pay interest on the amount that you borrow and not the entire amount that has been allotted to you.
- As long as you keep paying back the interest or make the minimum payments, you can keep borrowing money from the line of credit.
- You can use the money you borrow for pretty much any project you need to finance.
How does a line of credit work?
If you need extra cash for an emergency or just to have as a backup if you do need it, you can approach a bank or lending agency for a line of credit. Each organisation will have its own criteria for deciding if you are eligible and if yes, then the amount is usually based on your credit score. If eligible, the lending agency will extend a line of credit to you.
The total amount that you can borrow will be predetermined and the length of time for which you can keep drawing on the amount will also be fixed. You can request for a time duration of several years if you feel that that’s what you need.
During the borrowing period, you will be able to withdraw as much or as little as you need from the line of credit. However, you will not be able to borrow more than the set limit. As soon as you withdraw funds, you will start accumulating interest on only the amount that you have borrowed. Each lending agency has specific terms for paying back the interest amount. At &Solved we have our interest rate dependent on your credit score:
- Diamond – 12.99%,
- Platinum – 14.99%
- Gold – 16.99%,
- Silver – 18.99%
- Bronze – 22.99%
Once you have borrowed the maximum amount set on your line of credit, you will not be able to borrow any more money regardless of whether the time period has expired or not. If you start to pay back the borrowed amount either in full or in minimum payments, then you can continue to withdraw from the line of credit depending on what you have paid back. Paying only the minimum amount will mean that you continue to accumulate interest which you will have to pay back eventually.
What’s The Difference Between a Line of Credit and a Loan?
A loan is usually for a fixed amount, with fixed payments, and is paid off over a set time. And that’s it, it’s finished. If you ever want more money you have to go through the whole application process again (and pay the fees) with success uncertain.
A Line of Credit, on the other hand, allots you an amount of money to use as and when you wish, only paying interest on what you have actually withdrawn and are using. If you have drawn less than your Credit Level, or repaid all or part of your drawings, you can re-draw up to your Credit Level.
If a person thought they were only going to need funds once in their lifetime – take out a loan. If they think they might need funds more than once, a Line of Credit is a better solution.
Business Line of Credit
Just like a personal line of credit, businesses too can apply for a line of credit. A business line of credit works in very much the same way as a personal line of credit but is used for business expenses. Sure we don’t lend to businesses directly, but directors are welcome to apply personally and use the Line of Credit for business needs.
Secured line of credit and unsecured line of credit
A line of credit is usually unsecured. What this means is that you don’t have to provide some form of collateral to be eligible for the money. There is an exception, however, called the Home Equity Line of Credit where you are required to put up your home as collateral. HELOCs are based on the appreciation value of your home. Unsecured lines of credit usually have a higher interest rate than secured lines of credits because the lender has to take a higher risk.
The benefits of a line of credit
- Cash on demand for any project you need to be financed.
- Pay back only what you withdraw.
- Usually unsecured and don’t need you to provide collateral.
The bottom line
A line of credit is a revolving account that serves as a bank loan alternative. Lines of credit offer a great deal of flexibility to the borrower, providing much-needed funds for a variety of uses. Lines of credit are usually unsecured except HELOCs. Individuals can apply for a Line of Credit and that can be used for their business.
To find out more about how a line of credit could benefit you, or to apply for a line of credit, contact us at &Solved.