Every line of credit exhibits different characteristics compared to a regular loan. However, a credit line is suitable as an alternative to online personal loans on time to time basis.
You must be aware as to how a loan gets approved. So once that’s done, your quick cash gets credited to your savings account. You should understand that paying minimum dues is important along with the interest components on the full principle.
Similarities between Personal loan & Line of credit
Every line of credit shares a few common qualities with personal loans, with a tinge of difference in the way cash can be accessed and repayments are made. When you’re marking a decision between a loan & line of credit, it’s important to understand the differences to take a clear cut resolution: Every source of money can be allocated for personal or business purposes or both.
Personal line of credit vs. Personal loan
When you take a personal loan, you are obliged to pay interest on the full loan amount which is payable over a fixed span of time. On the contrary, a line of credit does not attract any interest part until you spend that portion of loan. Infact, interest is only charged on the outstanding balance in your account.
Taking a line of credit can free your loan usage and help you repay the loan back within a defined period of time. This can be excessively useful if the need of money has to be put to home renovation, marriage related spending etc. which keep shifting. This could be beneficial to reduce unnecessary costs when immediate requirements come along.
It can be fairly difficult to get a line of credit if your credit status is shaky. Every approval compulsorily requires you to be in a good condition. In that case, a personal loan can be far more valuable even when your credit score is unsteady. The only downside could be higher rates of interest.
Let’s understand why instant loans could be a versatile alternative for a few good reasons. It’s a good way to borrow what you immediately need, instead of keeping an open balance for continuous withdrawal. Here, you also have a fixed payable amount at hand so you can comfortably stick to a budget.
Just be careful with timely payments of the debt instead of piling it up for later. So, before arriving at a concrete decision, make sure you pay back your dues responsibly.
When do you ideally choose a Personal line of Credit:
Cases when you will opt for a personal line of credit over a personal loan:
- You’re unsure of the money to borrow
- You have expenditure over a long no. of years
- Your credit rating is strong
Cases when you will opt for a personal loan:
- You know the definite amount to borrow
- You want self- control on the debt borrowed
If you choose an inappropriate loan type, then your chances to pay up more steeply rises. Also, keep in mind how much financing is required in short & long term.
