04 Фев. 2014 г.|
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A personal line of credit may be able to bail you out, but it's important to understand how it compares to other credit options. A personal line of credit is an unsecured revolving account with a variable interest rate allowing you to borrow money as you need it, says Natalie M.
The maximum amount you can borrow varies widely based on your financial institution and credit qualifications. You can access your personal line of credit by check, phone or online, Brown says, adding that your monthly payments depend on how much you owe. Because personal lines of credit are not secured with collateral, they are generally offered to customers with a strong credit history who not only have a strong credit score but also can demonstrate an ability to repay the line, Brown says.
The better your credit rating, the more likely you are to get a personal line of credit on good terms, says Mike Sullivan, director of education for Take Charge America, a nonprofit credit counseling agency based in Phoenix. People who take out personal lines of credit usually are not in a situation with no other options. For people who work on commission or otherwise have irregular income, a personal line of credit can smooth out finances, Sullivan says. Sullivan once suggested a personal line of credit to a client who needed to close on the purchase of a vacation home a month before he could finalize the sale of another house. Another reason credit counselors might recommend a personal line of credit is to pay a tax bill, says Sheri L.
In addition, a personal line of credit is not intended to allow you to buy things you can't afford, Sullivan says.
Before you decide to take out a line of credit, compare the costs to other types of credit that may be available to you. Wells Fargo, which is promoting personal lines of credit through September 2014, is offering rates as low as 7%, with a one percentage point reduction for qualifying customers with a Wells Fargo checking account. A personal line of credit allows you to borrow only the money you need and offers a variable interest rate that is generally lower than fixed loan rates, Brown says. If you're not disciplined enough to avoid borrowing more than you can reasonably pay back, skip the line of credit, Stuart says.
Credit card cash advances are similar to personal lines of credit in that you get only the money you need when you need it.
If you own a house, a home equity line of credit is another option you might want to consider instead of a personal line of credit. One final point to consider when weighing a line of credit is the impact it will have on your credit score.
You work on commission and your income, while excellent annually, is a roller coaster month to month. Every institution sets rules and standards and those standards change rapidly based on competition and other factors, he says.
Stuart, senior communications specialist for Springboard Nonprofit Consumer Credit Management, in Riverside, California.
Because of tight federal regulations on education loans, you'd likely have trouble being approved if you tell the lending officer you want to use a personal line of credit to pay for college, Feddis says.
Look at the annual percentage rate (APR), whether and how much the APR can change, any fees to access the line, annual fees, late payment fees and fees for other issues, Sullivan says. Credit card cash advances also come with higher APRs than a card's purchase APR as well as extra fees, which you'll need to compare with the fees on the line of credit you're considering. A personal line of credit may be cheaper than a credit card cash advance, more flexible than a personal loan and won't require collateral as does a home equity line of credit. A personal line of credit is not secured, so it is a safer loan for the consumer, Sullivan says.