Most of us have experienced that dreaded event called too-many-days-before-payday. This is the unfortunate phenomenon that happens when you run out of grocery money or you require an unexpected car repair or your furnace blows up. You don’t have the option to ignore these emergencies.
Fortunately, a line of credit can help. Even more, fortunately, it’s now possible to apply for and receive a line of credit online, which allows you to access money from almost anywhere. If you’re considering getting a line of credit but are still sitting on the fence about it, here are four reasons why you’ll benefit from having one.
1. No Collateral Required
A line of credit, whether it be in person or an online credit line, allows you to pay off other debts or even to pay the invoices for vendors who work with your business.
This is an advantage, according to the Nest, because some vendors will give you a good-customer discount for paying the invoice off early, and the discount in question is often good enough that it covers the interest you’d pay on the line of credit.
As for paying off old debts, if you have a number of small debts, say $100 here, $30 there, it is easy to forget to pay them until the late notice comes. A line of credit takes care of all of these small debts, which prevents you from forgetting them and keeps you in good standing with your creditors.
2. You Have Access to Instant Cash
If you’re really strapped for money, then you’ll appreciate the fact that most lines of credit give you quick access to cash, often within a business day or so. This proves very helpful for those times when the unexpected happens like when you have to take your 8-year-old to the emergency room because she broke her arm playing softball.
From a business standpoint, a line of credit can get you through the times when your business’s cash flow is slow, like during the off-season. It can additionally allow you to replenish your financial capital after you’ve invested money in new business ventures.
Finally, if your business is ready to grow, but you don’t have the money to buy the product to make that happen, a line of credit can be a lifesaver.
3. You Can Save on Interest
An article on Chron points out that continually taking out loans can cost you a great deal in interest. The interest on a line of credit doesn’t work that way. The interest rates on a line of credit are usually periodic rates, according to Investopedia. They are figured up for each billing period.
4. How You Use the Money is More Flexible
Typically, when you get a loan, your lending institution expects you to use for a specific purpose, the most obvious being to buy a car or to cover start-up costs for a business. A credit line has a bit more flexibility, which in truth is both its advantage and disadvantage.
It’s an advantage because if you’re using it to cover an emergency or to buy more products for your business, then it gives you access to money when you need it.
On the other hand, because the borrower often experiences less scrutiny in terms of how you use the money, it can be tempting to use it to the excess. Part of good money management is knowing when to borrow because it moves you one step closer to your goals.
Good money management also requires you to take a good look at your budgeting practices. If you’re always borrowing money when you have an emergency, then you might need to consider saving up some money for an emergency fund.
The same can be said about borrowing money to advance your business. While this tool is very handy, it shouldn’t replace having some money in your business account. If you do, then you’ll truly only borrow money when you need to. Your line of credit becomes less necessary while still offering you an option when you truly need it.
From both a personal and a business standpoint, it can be a good idea to apply for an online line of credit. This money can help you pay for an emergency, like a hospital visit or an unexpected car repair.