So, you are seeking out a loan to manage expenses and want to learn about the types of personal lines of credit. There are many different types of loans that you could obtain, such as installment loans, auto loans, student loans, mortgage loans, credit-builder loans, debt consolidation loans, payday loans, and finally, personal lines of credit.
Two common loans are personal loans and personal lines of credit. Find out which is best for you prior to applying for either. Read about the different types of credit below to see if this is the best option for your needs.
Different Types Of Personal Lines Of Credit
Each type of credit was created with an intended purpose; however, because the credit is yours, you are able to use it as you wish. Still, the intended purpose of the lines of credit were made to be more beneficial in certain circumstances, so let’s review these purposes.
Personal Line Of Credit
Personal lines of credit are the most common for people seeking credit to use for personal expenses in a short period of time, so this is likely the line of credit that would suit your needs.
People commonly use personal lines of credit to refinance previous debt, such as student loans or auto loan debt.
Other frequent uses include financing large expenses and covering costs of minor expenses. Situations like these would be buying a new car or home, paying for a wedding or college, home improvements, car repairs, covering medical bills, or dental procedures.
Another thing to note about this type of credit is that it’s unsecured, which means that no collateral is needed to apply for this loan.
Personal Lines Of Credit Interest Rates
These lines of credit can have either variable or fixed interest rates. Variable rates can change over time and lead to higher costs than formerly anticipated, whereas fixed rates remain constant throughout the lending period.
For this reason, people seek out fixed interest rates, but sometimes variable rates are lower than fixed rates, so there are pros and cons to both types of interest rates. Discuss with your lender which is better for your financial needs.
Business Line Of Credit
As stated in the name, a business line of credit was created for the use of a business. This line of credit typically has a higher limit than a personal line of credit, making it possible to make larger purchases at once.
These larger limits allow for purchases such as new equipment or to cover cash flow issues within the business, especially during a slow season of sorts.
Business Lines Of Credit Interest Rates
These lines of credit usually have variable interest rates; however, depending on your lender, you may be able to work out a fixed interest rate with them.
Home Equity Line Of Credit (HELOC)
This type of credit is similar to the personal line because the credit does not need to be spent around business costs. The difference is that this line of credit is a secured loan rather than an unsecured loan.
However, your home’s equity is used within this type of credit to set the funding limit to pay for expenses. Depending on the situation, you can borrow anywhere from 80% to 90% of the value of your home.
HELOC Interest Rates
HELOCs have variable interest rates, but they are typically lower than a personal line of credit interest rate. Again, discuss this with your lender.
To avoid having a large repayment when the loan expires, make sure you make more than the minimum payments during the draw period of the loan.
Still Not Sure Which Types Of Personal Lines Of Credit You Want?
We would be thrilled to assist you in finding which line of credit is right for you at Cash Link USA if you live in Texas, Kansas, Missouri, Tennessee, or Wisconsin.
All the different personal lines of credit can be confusing. Luckily, we are very experienced in helping people find the right loan for them. Learn more about Cash Link USA and the types of personal lines of credit, and contact us today!