It can be confusing to decide between loans or lines of credit given the financing options available in the market. Each has its benefits and drawbacks, and making the wrong choice could cost you.
- Loan term — Loans have a fixed term (between 1 and 7 years) and you do repayments in full by the end of the term. On the contrary, lines of credit don’t come with a “term”. Also, you can borrow again after the funds have been repaid, plus interest.
- Repayments — Both of them entail monthly repayments. Although, the monthly payment for a loan is fixed. While with a line of credit, it depends on the previous balance, the amount you draw, accruing interest, and other factors.
- Disbursement — As soon as you agreed and signed the loan contract, the funds will be disbursed upfront. As for lines of credit, as long as you meet the minimum monthly repayments, you can withdraw up to the approved limit on an ongoing basis.
- Fees — Usually, loans charge monthly service and application fees, while lines of credit charge annual service fees. Although, lenders for both may charge various hidden costs.
Loans provide funds upfront and stipulate a term for you to pay back your loan. For the loan amount and duration of your loan term, the lender charges interest. The features below usually come with a loan:
- Upfront lump sum — You’ll receive the funds upfront when the lender approves your application and you agree to the loan contract.
- Term — A loan term is a specified period over which you make repayments to pay back the loan in full.
- Flexibility on your repayments — You may be able to choose how to make your monthly repayments depending on your lender — weekly, fortnightly, or monthly.
- Interest rate — This is either a fixed-interest rate — which won’t change over the loan term, or a variable interest rate — which, depending on market rates, can rise or fall.
- Discount rate — If you take out a significant loan amount, you may be offered a limited-time discount.
Lines of credit
Lines of credit only charge interest on the funds you use and they have a maximum credit limit. There is no fixed “term” for a line of credit, although, you can make monthly repayments. The funds are always available as long as you make the minimum repayments.
- Maximum credit limit option — If you have specific needs, the lender may raise the maximum credit limit.
- Flexibility on your withdrawals — As long as it doesn’t exceed your maximum/daily credit limit, you can withdraw funds whenever you like.
- No fixed repayments — There’s no fixed repayment amount provided that you make a minimum monthly payment — a percentage of the withdrawn funds.
- Interest rate — Interest may be paid on a monthly basis where the charge depends on the borrowed amount.
Has this happened to you recently?
- become unemployed
- foreclosure on your home
- suffered bankruptcy
- suffered another type of financial crisis
If so, your credit file will show negative marks that can affect your borrowing ability.
Pretty Penny Loans specialises in bad credit loans that will provide you with cash for anything listed above, and then some. PPL’s specialised bad credit loan does not consider a bad credit history as a limitation.
Consider PPL’s bad credit loans online as the first step to deal again with the bank or top credit providers, which could happen within 6 months.
You need to provide your personal details and latest bank statement to process and approve your application.