Apply for a line of credit.
Lines of credit are flexible and quickly / easily accessible in case of emergency.
Own your line of credit, step-by-step.
HOW does a line of credit WORK?
A line of credit has a maximum limit you can borrow, just like your credit card.
- Once a line is established, you can draw money whenever you please and for any purpose using a debit card - up to your limit.
- Once you've drawn your maximum, you can't borrow more until you pay back part / all of what you owe.
- You can apply to change the line's maximum limit after a while.
- Lines of credit tend to last about 10 years before they need to be renewed (this is called their 'term').
You and your lender will agree on how often you'll make interest payments.
- Unlike credit cards, lines of credit have no monthly grace period on interest payments - you'll start owing interest as soon as you draw on your line.
- Interest is charged only on the amount borrowed, not the entire limit. Interest payments may include an additional service fee.
- Lines of credit tend to have higher limits than credit cards, at lower interest rates.
You can start repaying the principal (what you've drawn) whenever.
- The sooner you do, the less you'll pay in interest overall.
- You’ll have to make minimum monthly payments (usually a small percentage of your balance (what you've drawn). They’ll be used to pay the interest owed on your line. If there’s anything leftover from a payment, it will be used to repay the principal.
Lines of credit are revolving credit: as long as you make the minimum monthly payment, you can continue to draw upon the line up to your limit, without having to re-apply with your lender.
- They're best used when you don't know exactly how much you need, when you'll need it, or when you'll be able to repay it.
They can have fixed or variable interest rates and can be both secured or unsecured.