We all have times in our lives when we’re strapped for cash. Home repairs, vehicle repairs, and medical bills don’t wait to pounce until you can afford them.
For most people, the first solution that comes to mind is a personal installment loan. While these loans can be great for one-time needs, they don’t offer long-term support.
An online line of credit is an alternative that could be what you’re looking for.
What Is an Online Line of Credit?
With a traditional loan, you apply each time you need money and get a lump sum upon approval. Then you pay back the amount with a structured series of payments.
With a line of credit, on the other hand, you apply once and receive a specific credit limit. You can request cash draws at any time, up to that set limit. You can keep receiving advances and paying them back as often as necessary.
In other words, a line of credit is similar to a credit card. The difference is that the line of credit gives you cash advances instead of you using it for purchases.
Most credit cards also offer the option of cash advances, but with added fees. With a line of credit, you may be able to skip those extra fees. Credit cards often have lower cash advance limits than a line of credit does as well.
How Is a Line of Credit Different From an Installment Loan?
There are several ways a line of credit differs from an installment loan.
For one, a line of credit requires one application. After you’re approved, the credit is there whenever you need it. An installment loan is a single transaction. You get one lump sum that you pay back, and then your account is closed.
A line of credit also gives you flexibility. You can take out as much or as little as you want each time. An installment loan, on the other hand, gives you one set amount regardless of how much you actually need.
Finally, the payoff structure is different for lines of credit compared to installment loans. Payments for a line of credit are similar to a credit card. You have a minimum payment, but you can pay as much as you want above that minimum. An installment loan is more structured with specific payment amounts.
Benefits of an Online Line of Credit
When you’re tight on cash, a line of credit offers several unique advantages.
1. Easy Use for Repeat Advances
Many people find themselves needing a cash infusion on a regular basis. For example, you may have an irregular income pattern because you’re self-employed. Perhaps you have an ongoing cash flow issue because your paydays simply don’t line up well with your bills’ due dates. Check out Thinkflow to help manage your cash flow.
In either of these cases, your credit could take a hit if you apply for a personal loan every time you need cash. Specifically, excessive applications for credit in a short amount of time could lower your credit score.
With a line of credit, you only apply once. The line stays open and the credit is available whenever you need it. Not only does this help your credit, but it saves you the time of going through an application process every time you need cash.
2. Simple, Fast Process
No one has the time to spend hours on a loan or line of credit application. Some types of loans require you to travel to the lender’s office during their business hours. Even if you can carve out the time for that appointment, why would you want to?
An online line of credit is simpler and more time efficient. You complete a quick application online and get an answer within minutes most of the time. Each time you need a cash advance, you can go online and receive a direct deposit in a hurry.
3. Minimized Interest
A line of credit offers you the advantage of taking out only the amount you need when you need it. That means you only pay interest on the amount you need.
Consider this scenario. You’re taking a break from work and you have a new job starting in two months. In the meantime, you need money to cover your bills.
With a regular loan, if you don’t want to apply for repeated loans that could hurt your credit, you have to take out the full amount right away. You might not need half of it for another month, but you’re paying interest while it sits in your bank account.
With a line of credit, you can take out as much as you need when each bill comes due. This way, you don’t start paying interest until you actually need the money.
4. Security and Availability
It’s no surprise that money is the top cause of stress in the US. We constantly fear that we won’t have enough of it to go around.
When you have an available line of credit, you can take a breath. You have emergency credit ready and waiting when you need it.
5. Flexible Payments
As mentioned, people with irregular incomes tend to apply more often for loans and lines of credit. When your income is inconsistent, a structured payment system for a personal loan is one more due date you’ll have to remember.
Lines of credit are more flexible, though. You have a minimum payment, but when times are good and money is flowing in, you can make higher payments. This saves you money in the long run by paying off your balance sooner so you stop paying interest.
How to Get a Line of Credit Online
If a line of credit sounds like a better fit for your needs than a personal loan, you can take action right now. Start by applying for an online line of credit with Echo Credit today.
Featured Photo by MD Duran on Unsplash.