Debunking 4 Common Myths About Personal Lines of Credit
A Personal Line of Credit is a type of loan where you can borrow money from a specific set of funds, as and when you need it. The lender charges you interest only on the amount you borrow. You are required to pay the borrowed amount and interest in regular instalments. Credit line loans can be used for any purpose and normally, do not need you to put up any asset as collateral.
If you are thinking of applying for a personal line of credit or simply want to know more about your credit options – you are in the right place! Here are 4 of the most common myths borrowers have when it comes to personal lines of credit.
Myth 1: Only Banks Offer Personal Lines of Credit
A popular misconception about personal lines of credit is that they can only be availed from banks. While banks do extend credit lines, they are not the only lenders available to you. Non-banking financial institutions, credit unions, and online lenders also have personal lines of credit products. This is useful to know since digital lenders often have a broader eligibility criterion compared to banks.
Myth 2: You Should Not Accept a Credit Limit Increase
Credit utilization is a ratio of how much credit you have used to the total amount of credit you have. Ideally, your credit utilization should be below 30% as this demonstrates a healthy financial situation. If you have too high a credit utilization, it flags you as a high-risk borrower that is borrowing over their means. A higher ratio also negatively impacts your credit score.
If you feel like your expenses are greater than your personal credit line limit, it is advisable that you ask for a credit limit increase. This ensures that the ratio of your credit usage to total credit remains the same or below 30%. This can help you maintain and boost your credit score while meeting your expenses.
Myth 3: Personal Lines of Credit are Bad
Credit is an important aspect of any individual’s financial profile. There are many ways through which you can access credit. Instant personal loans, home and auto loans, credit cards, and credit lines are a few examples. Often, individuals believe that credit leads to overspending or debt traps. While it is understandable why some people are afraid of credit, credit itself is not bad.
When used wisely, a personal credit line can help you save money and become financially stable in the long run. If you take on credit through a credit line loan and pay it off on time, it reflects well on your credit history. This gives you a better credit score, which helps you get lower interest rates on larger loans such as a home mortgage. So, if you are responsible for your personal finances, you stand to gain a lot from maintaining a personal line of credit.
A personal line of credit can be used for a number of purposes. It can help with debt consolidation, refinancing existing debt, paying off medical costs, home renovations, and starting your own business amongst other uses.
Myth 4: Processing and Approval Times for Personal Credit Lines Are Long
It is a long-standing myth that credit line loan applications take a long time to process and approve. While this used to be true in the past, it is no longer the case today. Instant loan apps such as CASHe offer a completely online process with minimal documentation and paperwork. This results in a quick and straightforward application, processing, and approval system. Most applications are processed and your instant credit line is approved within a few days. Loan apps also disburse cash to your account instantly. This makes a personal line of credit ideal for any emergency cash needs.
CASHe is a leading loan app that offers a range of financial products – instant personal loans, personal lines of credit, and Buy Now, Pay Later options. Download the app and get started on your instant credit line journey today!