Personal Line of Credit – Pros and Cons at a Glance

A personal line of credit is a unique facility under the personal loan which has its own merits and demerits. Read on as you explore more!

A personal line of credit is a convenient facility or version of a personal loan.

When you avail a personal line of credit facility, you get a pre-determined loan amount of which you can withdraw and repay only the interest as the EMIs.

You can use a Line of Credit facility for many reasons – planning a family vacation, renovating your home or for an upcoming wedding ceremony – without applying for many times.

There are also no extra fees for foreclosure and prepayment of the loan. Yet, you must check with your respective lenders about the entire terms and conditions of the line of credit at their end.

In short, a line of credit is a more flexible option to borrow money than a loan.

When it comes to the pros and cons of the line of credit, flexibility and convenience are its major advantages, but unpredictable payments and impulse spending are its potential downsides.

Personal Line Of Credit – The Pros 

Flexible Borrowing – The primary advantage of a personal line of credit is that you don’t need to commit to borrowing a specified amount of money upfront. The flexibility is useful when you don’t have much idea how much a project will cost.

It is also valuable when you have ongoing projects where payments spread over time.

Under a regular loan, you have to pay the entire amount on a predetermined schedule. With a personal line of credit, you are not only eligible to control your cash flows, but you are not influenced by the debt unless you use the entire amount.

Convenience – A personal line of credit is very convenient to use. Typical creditors provide the borrowers with line-to-checking account transfers, debit card access, and convenience checks.

You are also free to set up your line as your overdraft protection. You can also use a checking account against overdrafts as protection on the line.

Line Of Credit – The Cons  

Impulse Spending – When compared to other revolving credit forms, a personal line of credit provides with the risks of impulse spending. When you take responsible steps on a project ahead of the time and avail a loan, you have an idea where your money will go.

Since the advantage of the line of credit is flexibility, you get even more spending uncertainty. Thus, it is much easier for a prospective borrower to get lured into some unexpected and unplanned and unnecessary expenses.

Volatile Payments – When there is a lack of assurance on the total borrowing amount, it also depicts an inability to predict the loan amount payments.

The concept is simple to understand – As you keep borrowing, the loan balance also keeps increasing, and your monthly payments shoot up. Some lines of credit need a borrower to pay only the interest component as the EMIs for an initial period.

Yes, the structure reduces your payments but also holds-up paying down the balance of the loan. As a result, debt budgeting compulsions is a challenge with such conviction.

The Bottom Line 

Now that you know the potential advantages and disadvantages of the personal line of credit facility of a personal loan, you can now decide and leverage its potential in your favor.

If you are ready to apply for a personal loan or have an existing personal loan against your name, ask your creditors if they provide such a facility or not.

Now reputed creditors approve Online Personal Loans instantly. They also disburse the money in your bank account if you meet the eligibility conditions and furnish all the relevant documents online.