As you may already know, personal lines of credit are similar to credit cards because they allow you to have a predetermined amount of credit on-hand. If any of the credit is used, as soon as that amount is paid back, the credit is able to be used again.
There are many ways that lines of credit can be used, but what are the most common ways?
Common Uses For Personal Lines Of Credit
Though lines of credit can be used to accomplish many different financial tasks, they are typically used for paying off previous debts, making interest smaller, unexpected expenses, and financing projects that have unclear costs.
Because this form of a loan has a significantly lower interest rate, people tend to use it to pay off debt with higher interest rates. This allows them to pay off their outstanding debt(s) while paying less in the long run due to the lower interest rates.
Refinancing Previous Debt
Common debts that people refinance through personal lines of credit are student loan debts or auto loans.
Financing Large Expenses
People take advantage of lines of credit for big financial expenses such as a new house, car, a grand wedding, or college tuition.
Though lines of credit are typically used for sizable expenses, as mentioned above, they can also be used for minor expenses like home improvements, car repairs, covering unexpected medical or dental procedures.
Lines of credit are also used within businesses to purchase equipment or cover short-term cash flow issues within the business.
If your purpose for a line of credit was not explicitly mentioned, do not fret, lines of credit can be used however you wish. These are just the most common things that they are used for.
Different Types Of Lines Of Credit
There are many opportunities to use a line of credit, so we must discuss the different types of lines of credit available to you. This will ensure that you choose the right one for your needs.
Personal Line of Credit
This is likely the line of credit you are interested in. It is typically used to cover personal expenses in a short period of time.
Business Line of Credit
This line of credit is specifically designed for businesses. It usually has higher limits and is typically used for business expenses like new equipment.
Home Equity Line Of Credit (HELOC)
This line of credit uses your home’s equity to receive a set amount of funding that you can use to pay for expenses, and you could borrow as much as 90% of the value of your home.
With a HELOC, you will want to ensure that you make more than just minimum payments during the draw period so that you do not get stuck with a large repayment once the loan expires.
Interest Rates of Personal Lines of Credit
As mentioned above, some people use lines of credit to lower their interest rates. However, some lines of credit are variable, so they can fluctuate over time and lead to higher costs than originally expected.
HELOCs have variable interest rates, but they are typically lower than a personal line of credit interest rate.
If you want a personal line of credit to refinance your outstanding debt(s) and lower your interest rates, you should look for a line that has a fixed interest rate.
Fixed interest rates will stay “fixed” or constant until the line of credit expires, so you would not have to worry about the interest rates increasing.
Discuss with your lender whether you should seek a variable or fixed interest rate based on your financial needs before making a decision.
Do You Qualify For A Personal Line Of Credit At Cash Link USA?
If you live in Texas, Kansas, Missouri, Tennessee, or Wisconsin, and are interested in a personal line of credit, start with us at Cash Link USA!
Applying for a personal line of credit with Cash Link USA is quick and easy! We are passionate about helping those in financial need; let us fund your personal lines of credit and apply with us today!