What types of credit lines are there?
- Personal Line of Credit (PLOC): An unsecured credit line which requires no collateral down. PLOC’s typically have higher interest rates and lower limits than HELOC’s.
- Home Equity Lines of Credit (HELOC): A secured line with your home being used as collateral. HELOC’s typically require good credit history as they rely heavily on your credit score.
How does a personal line of credit (PLOC) work?
A PLOC is an unsecured account which means that it requires no collateral to qualify for. This is beneficial to you as the borrower since it speeds up approval time and you don’t have to put up an asset the lender can seize if you default. However, it can lead to higher interest rates, or denial of services, if your credit isn’t in great standing since the lender is shouldering all of the risk.
Once you’re approved, you can use as much or as little of the funds available to you on whatever you want. Similar to credit cards, your personal credit line doesn’t have a fixed monthly payment. You do have a minimum monthly payment that you have to keep up with in order to continue to have access to the funds. When you make that payment, those funds are available to be reused if needed.
Risks of an LOC
There’s risk involved with borrowing money of any kind from any financial institution. If you have a high credit score, stable disposable income, and proper money management, there’s very little risk involved. If anything, this may be far more beneficial and cost effective than a credit card or loan for you.
The main risk with a personal credit line is that most lenders have a variable interest rate which means that you’ll accrue interest at different rates depending on the market. The amount of interest you owe with fluctuate with how much the interest rate changes over a specific time frame. Depending on the financial institution, you’ll find interest rates as low as 7% that go as high as 25%.
Incredible flexibility: You can access your money anywhere, anytime and use it for whatever you want and pay it off as fast or as slowly as you like.
Lower interest payments: You only owe interest on the amount of credit used, not the amount loaned.
Lower interest rates: It’s not uncommon for LOC’s to have lower interest rates than credit cards.
Possible Discounts: Most lenders offer discounts or benefits on a guaranteed credit line if you have other accounts with them. These are typically having your fee waived, a lower interest rate, or a higher line depending on your history with them.
Bad credit is a problem: Lenders are very picky when it comes to approving unsecured funds to borrowers with less than ideal credit. If you have poor credit, focus on boosting your standing before applying.
Finite borrowing period: These lines don’t stay open forever. Most lenders will only keep this revolving account open for a few years since it is intended to be temporary. Be sure to double check your draw time before signing as the full amount will be due at the end of the period.
Fees and variable rates: Rates always vary from vendor to vendor, but LOCs typically have variable rates and annual fees associated with them.
See if you Qualify with King of Kash!
Need a fast line of credit? Get in touch with us today! King of Kash has been providing affordable loans for almost 40 years and has become one of the fastest growing lending institutions in Missouri. We’ve expanded our services into 8 states with many more on the way and we credit our growth to knowing and understanding your needs better than any other financial institution out there.
Our lending specialists will evaluate your financial needs to find the right borrowing option for you. They help you make sure that paying off your loans is as manageable and affordable as it can get. We pride ourselves on our ability to process loans quickly, provide decisions immediately, and with high approval rates. We understand your financial needs and are always willing to provide you the assistance you need.