A personal line of credit is an important responsibility, so you’ll benefit from carefully researching your options first. One of the most helpful things to know about personal lines of credit is that there are many options to suit different circumstances. Before asking your lender questions (and you’ll probably have a lot), there are some questions that you’ll need to ask yourself.
Here are some of the important considerations to keep in mind:
How Much Should I Borrow on my Line of Credit?
Each lender has a minimum and maximum amounts for credit lines with borrowers’ credit scores also being a factor. Although some expenses, like vacations, are not well-suited to this borrowing method, unanticipated large expenses or debt consolidation can be perfect for taking out a line of credit.
When you take advantage of a credit line, it’s important to borrow according to your needs. Otherwise, the loan will have higher costs in the long run. Adding your anticipated expenses and debts will help you come up with an amount that works.
What is the Easiest Way to Find my Credit Score?
Your credit score is one of the most important considerations when determining your creditworthiness for a personal line of credit. The higher your credit score, usually on a scale of 300 to 850, the greater your chances of loan approval. Although there are different credit scoring models, most lenders prefer FICO, which uses the 300 to 850 range.
Checking your credit report before you apply for your credit line can help you spot any potential problems. You can get a free copy of your report from all three reporting agencies once a year. If you find any inaccuracies in your report, disputing these errors will help keep your report as accurate as possible.
How Does Repayment for my Line of Credit Work?
The repayment process for credit lines usually involves monthly payments. It’s important to think about whether the amount that you agree to pay is an obligation that you’ll meet consistently. Keep in mind that the monthly payment depends on the amount borrowed or principal, interest rate, and the time the line of credit is taken out for.
An important consideration is what your monthly due date is and what date you need to start making your payments. If the lender charges fees for paying off your obligation early, you’ll want to know about these. Another thing that you’ll want to know about is what fees if any, the lender may charge at the beginning of the process.
What Information Do I Need to Provide When Applying for my Loan?
Having the right documentation at hand will make applying for your line of credit a much easier process. Information on income from a job, your business, or government benefits, along with your Social Security number are necessary. The lender will also need to know why you are applying for the loan.
Identity verification is also an important part of the process. Most lenders require either a valid Driver’s License, a state-issued non-Driver ID, or a passport. Although rare, sometimes lenders require extra information after receiving the application to process it properly.
Will I Need to Use a Co-Signer for my Line of Credit?
Although many lenders allow co-signers, having one is not a requirement. An advantage of a co-signer is that they can assume the responsibility for your line of credit if you are unable to make payments. Some lenders may allow co-signers, while others don’t, so you will want to find out about this before applying to avoid any problems.
If you are thinking about applying for a personal line of credit, contacting us before you start with any questions is a good idea.