Credit line, also called credit limit, is the maximum amount of credit that a client is authorized to use. Everyone of us can face the situation when there are unexpected expenses, but personal means for their payment are insufficient. It can be, for example, urgent car repair, unexpected doctor’s visit or some accident which cause unforeseen expenses. In such cases there are a lot of financial solutions and one of these solutions is credit line. Credit lines are available both for individuals and companies. Individuals can use credit line like security for rainy days, but companies can use credit line in periods when the profit is smaller. Credit line, unlike other loans, is quite new service in the market of lending services, and it is offered both by banks and by private lenders.
It can be said that credit line is similar to other loans and it includes some functions which are usually provided by credit cards, but there are some significant differences which everyone should know. Credit line is a type of loan where the borrower by itself can determine the credit limit, the repayment time and spending targets. In addition, there is no need to specify targets to which the loan will be spent. In the case of credit line borrower can use as many resources as needed from the limit of credit line – if borrower does not need all of loaned money, it is not obligated to use it. Borrower does not need to use the loaned money immediately when it is transferred to the bank account – it can be used whenever it is necessary, but, of course, it can be used only within the prescribed term. Choosing credit line, unlike overdraft, the borrower avoids debts, because it determines the repayment time and the limit of means according to its possibilities.
When the borrower starts to use means of credit line, of course, it must repay them. Once in a month means from credit line has to be repaid – they can be repaid fully or partly, paying the minimum amount which is previously specified. Then the borrower can borrow means from the credit line repeatedly. One of credit line’s advantages is the fact that the borrower can repay the loaned money before the repayment time, thereby saving money on interest payments. There are a lot of loans which have to be repaid fully even if they are repaid ahead of schedule, but in the case of credit line the borrower pays interests only for those means which have been used.
The best credit line’s advantage is the fact that if the borrower has not used means, it does not have to pay anything for them. Credit line works like security – if borrower needs extra means, it can get them from credit line, but if there is no need for extra means, borrower does not have to pay anything, because the lender has not loose them. Despite the fact that usually in such situations people prefer fast loans, credit line is better and more favourable option. If person uses credit line, loaned money is in bank account, therefore, it is available and can be used at any time of the day, unlike fast loans, which can be received in specified time.
Credit line, compared to other loans, has lower interest rate. Unlike fast loans, which are known for their high interest rates, credit line has lower interest rate which means lower costs for lender’s services to borrower. Of course, it is recommended to inquire about interest rates of each lender, because they differ. Before signing the first credit line which is advertised in the Internet or on TV, it is important to compare lenders and their offers, choosing the best deal. Collation is needed because such factors as the minimum and the maximum amount of loan, as well as the repayment time varies depending on lenders.
In order to get the credit line the potential client – individual or company – has to correspond to lender’s criteria and preconditions. One of the most important aspects which is evaluated both by banks and by private lenders is ability to pay. Credit line is not available for persons who do not have regular and stable income, because it means that the person will have difficulties with the loan repayment. Potential clients have to take into account that lender has rights to require some documents which can formally affirm person’s income. These documents can be, for example, a statement from the Revenue service or the employer, as well as a bank account statement. Some lenders determine the minimum amount of monthly income as well. However, everyone should know that the potential client has to have a safe source of income to get the credit line.
The other important aspect to which lenders pay attention is potential client’s credit history. Credit history includes not only previous loan commitments, but also actual loan commitments. In order to get the credit line potential client’s credit history has to be positive, which means that person cannot have any debts. Formerly it was easier to get the loan, because lenders did not have an information about borrowers loan commitments, but today this information is so complete that it is impossible to hide something from lenders. If the potential client has recently got into debtors register, there is a possibility that an application for credit line will be rejected. Debts raise the risk that the lender may suffer losses, because the borrower may skip payments again. Taking into account that the risk is higher, application for credit line is rejected to avoid potential losses.
Not only clients pay attention to different criteria, choosing the best offer, but also lenders. Lenders have many restrictions on their potential clients. One of such restrictions is age. To be eligible for a credit line, the borrower must have reached the age of majority. Lenders determine not only the minimum age, but also the maximum age. However, every lender may have different criteria, therefore, find out these criteria before you submit an application for credit line. Credit line is available only for those who are citizens of Georgia or are non-citizens with residence permit. During submission of loan application the person has to take into account that the lender may ask for identity documents. The lender will ask for e-mail address, phone number and bank account number as well. An application for credit line can be submitted not only in person, but also in the Internet.
It is not a secret that all loan commitments, including credit line, are serious responsibility. Debts and regular delays are recorded, affecting opportunities to get the loan in the future. If the person wants to get the credit line, its credit history has to be positive, namely, there cannot be outstanding loan commitments.