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
The first thing you need to do is provide your details. After that, the &Solved team assess your information to give you a credit level between $3,000 and $30,000 depending on your income, expenses, and credit history. The process is usually completed within 24 hours. 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?
The definition of line of credit is a fixed amount of credit products that a bank or lending agency sees fit to let you borrow as and when you require it. This means that you don’t have to reapply for a new loan even if you haven’t fully paid off the first. 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.
- People often look for “line of credit loans” but they aren’t quite same as personal loans so as your lender we encourage you to refer to the arrangement just as a line of credit.
How does a line of credit work?
Whether you need extra cash for an emergency or just want to have a backup plan in case 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. If they accept your application, the amount you can potentially borrow is usually based on your credit score. If eligible, the lending agency will extend a line of credit to you.
The total lending amount 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 variable interest rates (also called comparison 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 credit limit amount set on your line of credit, you will not be able to borrow any more money regardless of whether or not the time period has expired. 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 cover with repayments eventually. It is worth noting that even if you’re arranging a business line of credit, the loan is considered an unsecured personal arrangement. For that reason, we won’t take the equity of any assets into the assessment.
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. You can’t re-borrow the funds that you have paid off. If you ever want more money you have to apply again (and pay the involved fees) with success uncertain.
A Line of Credit, on the other hand, allots you an amount of money, the credit limit, to use as and when you wish. You only pay interest on what you have actually withdrawn and are currently 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 Limit Level.
If you think that you are only going to need extra funds once in your lifetime, then take out a loan. On the other hand, if you think you may need funds more than once, a line of credit will be a better solution for you. You won’t have to worry about extra fees or the process of applying again.
It is worth highlighting that the common use of “line of credit loans” is not strictly the correct way to refer to them, as an AFSL and Australian credit license holder we encourage each and every customer to use the right terminology.
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 one but is used for business expenses. While we don’t lend to businesses directly, company directors are welcome to apply personally and use the line of credit we offer them 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 loaned funds. A secured line of credit is commonly tied to asset such as a car or house. 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 a secured line of credit because lenders have to take a higher risk.
The benefits of a line of credit
There are several benefits for opening a personal line of credit. These include the following:
- Access to cash on demand for any project you need to be financed.
- You only need to pay back interest on what you withdraw.
- Lines are usually unsecured and don’t need you to provide collateral.
- Credit lines are often very competitive with personal loans and offer much more flexible repayments.
- You may spend the funds on whatever you choose. This could be a key purchases for your home or business, a life event such as a wedding or the birth of a child, or even repayments towards your credit cards. You may be able to even replace your credit card altogether.
Tips on How to Use a Line of Credit
Prior to applying for a line of credit you should first review your credit score and take actions to improve your credit health. This will not only maximize your chance of being approved with a better credit rating you’ll have access to lower interest rates. During the approval process, you’ll have to determine how much money you require. It is always best to know your credit limit and if you can’t afford payments, reevaluate your position and seek further financial advice. If you intend to use borrowed money purely to pay off other debts such as a credit card or credit cards this may be a red flag that you are struggling financially. Taking on new debt may not be the answer to your problem.
Once you know your credit limit, you can begin the application process for line of credit. Use the money you borrow to cover expenses such as home improvements, cars, weddings, or holidays. With access to your credit line formed you’ll have a new flexible way to obtain money. It is important to take note of the credit limit, terms and conditions, and when your repayments fall so you can budget accordingly and monitor the amount you spend. Regardless of the lenders you go through, if a customer defaults on repayments, additional fees and charges apply.
How to Apply for a Line of Credit
If you are an Australian permanent resident or citizen, are actively employed, and are 21 years or older, you can apply for a line of credit.
- Step One: Go to the secured &Solved website and click the purple “Apply” button in the top right-hand corner.
- Step Two: Input a variable amount between $3,000 and $30,000 that you would like to borrow into the provided space. Bear in mind that you will only have to pay interest on the amount borrowed and not for your entire credit limit.
- Step Three: Fill in the provided form with your personal information. You will also need to input your employment and financial information, as wells as a valid driver’s license number.
- Step Four: Read and confirm the privacy statement and identity verification fields.
- Step Five: Click the “Send Application” button so that our Brisbane-based team can assess your application. As our customer, your information will be secured. We will always respect your privacy and treat you with respect and honesty.
The bottom line
A line of credit loan is a revolving account that serves as an alternative to personal loans from a bank. 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 just like personal loans. Individuals can also apply for a line of credit and that can be used for their business. Terms and Conditions as well as fees and charges will apply. We pride ourselves on offering competitive fees with clear, straightforward terms and conditions.