Use a Personal Line of Credit

If it weren't for the fact that bankers and financial people have their own way of talking, the term "personal line of credit" could probably refer to everything from your gasoline credit card to the tab you run at your corner grocery. However, the fact is that a personal line of credit is a distinct financial product, as different from a personal loan as it is from a credit card. When you know exactly how much money you need up front, and you don't anticipate needing additional financing any time soon, then a standard personal loan is the way to go. You receive the entire amount of the loan up front, in a lump sum, and agree to make fixed monthly payments of principal and interest. The interest rate will depend on your credit history, income, assets, and so forth. On the other hand, a personal line of credit allows you to borrow only the funds you need at the time you need them—and you can withdraw more funds without having to reapply (for however long a term is established for the credit line). Repayment terms are more flexible. You can make interest-only payments and you repay the principal at any time during the term. All things being equal with your credit score and banking relationship, the interest rate on a personal line of credit is generally lower than regular loan rates. Sometimes a personal line of credit is unsecured, sometimes it is secured by others assets, including homes. Before taking any offer of credit that uses your primary residence as collateral, make sure to consult a personal financial planner. Some borrowers who got overextended with personal lines of credit lost their homes. Learning to use credit is equally as important as learning to earn and save money, and properly handled can be a tremendous help when it comes time to raise children, move into a bigger house or pay for braces. Comments (0) Show/Hide comments Write comment Show/Hide comment form Name Email Website Title Comment Add Comment