All you need to know about Lines of Credit

Lines of credit can be described as amounts of credit extended to a borrower. It’s an arrangement between a financial institution and a customer that establishes a maximum loan balance that the lender permits the borrower to access or maintain.

The borrower can access funds from the line of credit at any time.

What makes line of credit unique is the fact that they offer a specified amount of money that an individual can access as needed and then repay immediately or over a pre-specified period of time.

Interest is charged as soon as the money is borrowed.

Many businesses have been using lines of credit to meet their working capital needs.

When it’s best to make use of lines of credit:

These funds are not usually intended to be used to fund single one-time purchases. They can be rather useful for funding projects where it may be difficult to ascertain the amount of funds needed upfront.

When large cash deposits are required.

What are the benefits of opting for lines of credit?

They may be a cheaper option than a credit card, because of lower interest rates. Opting for lines of credit may offer more flexible repayment schedules.

Unsecured lines of credit are cheaper than loans from payday lenders and are usually cheaper than credit cards.

Lines of credit can be secured with real property.

Getting access to line of credit can improve a borrower’s credit score.

If you’re a business owner, applying of lines of credit can help in terms of maintaining cash flow for the company. It can also help to avoid missed payments due to a lack of funds.

These loans can be ideal for funding home improvement projects.

These are usually flexible loans offers from financial institutions.