Line of Credit

A man on a computer exploring a personal line of credit

What is a Line of Credit?

A line of credit refers to a borrowing limit extended by a financial institution. Sometimes called a personal line of credit, bank line, or credit line. This kind of credit gives borrowers the flexibility of withdrawing funds on an as-needed basis so long as they do not exceed their limit. Typically, the lender will set minimum monthly payments and allow the borrower to pay the full outstanding balance at any time.

Generally, any fees or interest is accrued on the outstanding balance, and not on the total amount of their borrowing limit. Lenders may give the borrower checks, a debit card, or access to online transfers directly to a checking or savings account to conveniently withdraw funds

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Different Types of Lines of Credit

Lenders may offer secured or unsecured lines of credit. For instance:

Secured line of credit

A finance company might offer a secured line of credit with home equity, bank CD, or other assets as collateral. For instance, home equity lines of credit, called HELOCs, have grown popular as a way to use home equity without selling the house. Because they are secured, borrowers might also enjoy lower interest rates. According to the FTC, borrowers should understand that they risk default or even foreclosure if they do not make timely payments.

Unsecured line of credit

An unsecured loan does not require collateral. A personal line of credit might come with a higher interest rate than a secured one because the lender assumes more risk than they would if collateral backed the loan. At the same time, borrowers do not need to risk or even own assets that are required for a secured loan.

Benefits of a Personal Line of Credit

A personal line of credit offers several benefits for people who need to access funds quickly and conveniently.
A group discussing unsecured personal loans

No Collateral Required

A personal line of credit does not require the borrower to stake any assets against the loan balance. Borrowers do not need to own a home, CD, or other assets to use as collateral. Thus, finance companies make them accessible to a larger population than secured loans.

A personal line of credit can minimize the risk to personal assets. It also keeps these assets free of entanglement, so they can continue to grow in value and strengthen the borrower's financial standing.

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Speed and Convenience

Today's best personal line of credit lenders can offer their customers speed and convenience. These lenders make the application process simple by offering an online experience and can provide a decision within minutes. This speed and convenience compare favorably to waiting weeks to get a decision from a traditional bank branch.

Even better, a decision can lead to money being deposited in a borrower’s bank account as early as the next business day*. Borrowers that have an urgent medical expense or car repair appreciate fast access to the funds they need.

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A personal line of credit is a flexible form of financing available to most people. The lender will only charge interest on the actual amount borrowed and not the entire credit line. Consumers can withdraw the cash they need and leave the rest of their balance available for a future withdrawal.

Also, the lender will set a minimum monthly payment based on the actual amount borrowed and not the credit limit. If the borrower still has some room left on their limit, they can choose to request more funds. They can also decide to manage their debt by paying the minimum or paying more to speed up repayment and lower the total interest paid. Some lenders may even increase the credit limit once borrowers establish themselves by consistently making their payments on time.

When to Use a Personal Line of Credit

A personal line of credit offers an ideal solution for consumers who do not know exactly how much money they will require to handle unexpected bills or essential expenses. Everyone faces their own unique situation, but these examples can illustrate times to consider a line of credit.

Medical or Repair Expenses

Sometimes, you cannot put off a visit to the dentist, doctor, lawyer, plumber, or a qualified auto mechanic. However, many people do not have the savings to cover these urgent or unexpected needs. For instance, a plumber might visit to fix a clogged toilet and find that the entire mainline needs replacing. The flexibility of a personal line of credit lets borrowers take what they need and preserve the rest.

Cash Flow Fluctuations

Tax preparers, landscapers, real estate agents, and many other professions tend to experience peak periods and slow seasons. Entrepreneurs may struggle to manage cash flow, and employees might have their hours cut when business slows down. A flexible line of credit can provide essential cash flow to manage budgets or even sustain a business.

Home Improvements

Some home improvements can add value to a home, but it's difficult to predict the exact cost when planning the project. A line of credit will provide homeowners with ready access to the cash they need to fund home improvements. With a personal line of credit, the homeowners do not need to reduce equity they have in their home as this type of loan does not require collateral.

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How Do Personal Lines of Credit Compare to Other Financing Options?

Today's consumers have plenty of credit options. Below we compare personal lines of credit to other common loan options, including credit cards, and personal loans.
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Credit Cards

In some ways, a personal line of credit works similarly to a credit card. The borrower has a credit limit and can borrow at will until they reach it. Still, most credit cards only let users borrow small amounts of cash and primarily focus on spending. Most credit cards charge more for cash advances than they do for purchases. A personal line of credit will provide cash directly to a bank account.
A man explaining personal loans

Personal Loans

A personal loan does not offer revolving credit. Instead, borrowers receive a fixed sum and generally make fixed payments until they have repaid the balance. Typically, the lender will spread the interest across all payments. In contrast to a line of credit, borrowers can withdraw only the amount then need to borrow. A personal loan might suit borrowers who know precisely how much money they will need for a one-time expense, like a wedding, or credit card payoff.
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How Do Borrowers Access the Balance on a Personal Line of Credit?

Finance companies that offer personal lines of credit generally make the process of withdrawing funds fast and convenient. Lenders can typically deposit the money into the borrower’s checking account within one business day*.

Apply Today to Access Cash as Soon as Tomorrow*

Integra Credit offers a quick, online application for personal lines of credit. Borrowers generally enjoy a instant decision and can receive funds in their accounts by the next business day*. Apply online right now or contact Integra Credit by phone or email to get fast cash.

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