What’s the difference between an Individual loan and a Credit Line? Credit?
There are two ways to get money borrowed: you can either take the opportunity to take out a individual loan or create an private line of credit. If you take out a personal loan, you receive an amount in one lump and then have to pay each month fixed payments. In contrast when you take out a line of credit, you get access to a specific amount of money which you are able to draw upon whenever you want and then pay back in time, paying interest. The one you select is likely to be contingent on your requirements. Here are the key distinctions between the two
Personal Credit
Personal loans offer you a set amount in one lump. They are typically used to pay to pay for one-time expenses like an unexpected cost and consolidating debt. The loan is paid back over time, paying interest. The amount will likely be identical every month. You can get a personal loan through the local credit union, bank or finance company, or even an online lenders. The loans are available with adjustable or fixed rates of interest and are paid back within a certain time frame.
Advantages of a Personal Loan
1. Fixed Monthly Payments
Since personal loans come with fixed monthly payment dates, they allow you to include a predictable line for your budget. If you make a complete payments punctually, your loan will be fully paid by the time you finish your period of the loan. However when you pay the minimum payment for the line of credit however, you might not get the same outcome.
2. A Fixed Rate or a Variable Rate of Interest
A personal loan can be a fixed or variable rate of interest. A fixed rate isn’t subject to change throughout the duration of the loan, whereas an variable interest rate will be adjusted according to the prime rate or another index. This means that your interest and the amount of your loan payment could fluctuate up or down during the life of your loan. The time for adjustment in the case of variable rates might be different based on your loan contract. The longer the period of your loan contract, the more chance of rate fluctuations since rates fluctuate throughout the course of the course of.
3. Lower Interest Rates
A personal loan might have a lower interest rate as compared to a private line credit, as credit lines are generally considered to be more risky for those who lend them. However, individual rates typically depend on the rating on credit and the way in which the lender evaluates your creditworthiness. The rates for personal loans can vary widely.
4. Fixed Repayment Time
In most cases you will find a fixed term for the repayment of personal loans, which can vary between twelve to sixty months but sometimes it is longer. After the loan has been cleared, you’re free from the debt.
Pros and Cons of a Personal Loan
1. Penalties and Fees for Loans
There are origination fees as well as application fees and balance transfer fees. closing costs or annual fees, as well as penalties for prepayments that are that are associated with personal loans.
2. A Little Less Flexibility in Repayment
When you take out a personal loan you are given a date on which the loan repayment is due every month. The late fee could be charged when you don’t complete your monthly payments in time.
3. Line of Credit for Personal Line of Credit
Personal lines of credit can be like a credit card in that, although you’re granted a certain limit of credits, you do not draw it out until you require the money. You withdraw the funds when you need it and then pay an annual minimum payment.
Benefits of a Personal Line of Credit
1. Only borrow what you really need.
If you have a personal line of credit, you can only access the funds you have approved in accordance with your needs. As an example, you could have ebbs and flows of your income, where you might require extra cash to cover bills. When your income grows you are able to repay the credit you used.
2. Permanent Access to Funds
While there is a limit to the amount that you are allowed to take out however, with an individual line of credit you can access money anytime you require it. You can always borrow small amounts, repay them and take them out again.
3. Lower Interest Rate than Credit Cards
Although interest rates for personal lines of credit can be very high, some provide better rates than credit cards.
Pros and Cons of a Personal Line of Credit
1. Higher Interest Rates than Personal Loans
Personal lines of credit typically comes with greater interest than personal loans.
2. Variable Interest Rates
A personal credit line may include the feature of a fixed rate which means that the lender has the ability to increase or decrease the interest rate when market interest rates change at specific intervals.
3. Possibility of Overspending
Since you are assured access to funds it is possible of spending up to your limit, even if there is no require the money.
To determine which loan product is appropriate for you, think about how you will make use of the funds (one time or. an ongoing requirement) and also your spending habits in relation to a responsible approach to managing and paying back the debt.
Do you require an individual loan? Call Mariner Finance today.