Line of Credit
Business line of credit
You own a business which has seasonal variations or unexpected and unforeseen liquidity requirements. You may need immediate capital to manage your stock during the festive season. We have a solution to all such problems – Simple Line of Credit.
Simple Line of Credit is a credit facility that will give you control over your finances and increase visibility of your finances for you.
How it works
Are you planning on renovating your house over the next several years, but you don’t know how much it will cost? Perhaps you foresee long-term medical costs that may not be completely covered by your insurance. Maybe your twin daughters surprised you by getting accepted to Ivy League schools, and you need to fill in the financial gap. A line of credit is one financial strategy to tackle large and unpredictable or variable costs.
A line of credit is a type of loan that doesn’t give you one giant injection of funds the way a traditional loan does. Like a credit card, you draw on the credit when you need to pay for something that is financially out of reach. Unlike most credit cards, the interest rates on
lines of credit are generally low, and the limits tend to be high.
There are several reason why a person may choose a line of credit over a traditional loan. With a traditional loan, you get a chunk of money and immediately begin paying the loan back, regardless of when you actually use the money. But a line of credit lets you borrow the amount you need when you need it. With most lines of credit, you make payments only on the credit you’ve actually used.
WHEN SHOULD YOU APPLY FOR LINE OF CREDIT
Irregular cash-flows depending on seasonal factors
Fluctuating Capital Requirements
Seasonal Inventory Requirements
Let’s explore the types of lines of credit and which factors decide whether or not you’ll qualify for one.
SECURED AND UNSECURED
Secured lines of credit, like secure loans, are backed by collateral, such as a house or business property. Unsecured lines of credit are not backed by collateral and, therefore, tend to have higher interest rates to account for the greater risk to the lender.
HOME EQUITY LOAN
A home equity loan, usually called a second mortgage, differs from a home equity line of credit. A home equity loan is a lump sum, not a line of credit you can use as needed. The interest rate and payment amounts are generally fixed as soon as you sign the loan agreement versus the variable rates and terms of a home equity loan.