Personal line of credit or personal loan?
Everyone needs credit sooner or later, but different situations require different loan products, each with a unique set of advantages and disadvantages. Aside from auto loans or mortgages, most personal loans are classified as a personal line of credit or a personal loan. So which is which, and when is each most advantageous?
- A personal line of credit is ideal for ongoing projects such as home renovations or wedding planning, because the borrower makes payments only on the amount of the credit used. For instance, a June bride may purchase her gown in October, buy stationery in February, and pay deposits to the caterer and reception venue in March, and so on. If the bride takes out a personal loan instead of a personal line of credit, she’d be making payments on the full amount regardless of what portion of the loan she’s used.
- A personal line of credit makes an idea safety net. When an emergency strikes, a personal line of credit is at the ready to meet financial needs. Unlike personal loans that require application and approval processes with each need, a personal line of credit can be tapped into as needed without further application.
- A personal line of credit is generally available for any amount from $10,000 to $250,000—depending, of course, on the applicant’s credit history and income.
- A personal line of credit usually has a variable rate of interest that is lower than that of personal loans.
- Some personal loans carry a penalty for per-payment. There is never a prepayment penalty with a personal line of credit, because there is no timeline for paying off the credit. Any unused or paid off portion of the personal line of credit is immediately available to be used again, and until it is, the borrower can enjoy lower monthly payments.
Let a loan-consulting firm help you determine which loan products are best for your needs, and help you acquire them. America One Unsecured has been helping people achieve their dreams and attain financial security since 1999, and they can help you too. Click here to learn more and get started.