Applying for an Online Line of CreditPublished on June 18, 2021 by Daniel Azzoli
They say money doesn’t grow on trees, and anyone who’s gone through a period where they’re just trying to make ends meet can speak to the validity of this adage better than most. One of the scariest parts of living on a tight budget is the thought of what kind of disaster an emergency expense could spell for your financial situation. Whether it’s a sudden flat tire or a broken furnace, an unexpected but essential expense can be tough to deal with if your savings are a little light.
So, if you do run into an emergency without the financial means to handle it, what do you do? An emergency fund should always be the first place you turn to, assuming you have one. This is a specific savings funds that’s solely dedicated to helping you deal with emergency expenses. The main problem here is that you don’t build up a solid emergency fund overnight. It can take months, sometimes years of steady contributions to get it to a healthy place, and if this isn’t something that you’ve prioritized before, you might be starting from ground zero.
If you end up in an emergency situation without the means to handle it, an online line of credit may be what you need to get through this tough time. We’re going to take a look at what this financial product is, when it might be a good idea to apply for one, and how to go about applying for it in the first place.
Defining a Personal Line of Credit
So, how does a personal line of credit work? If you have a credit card, you probably have some understanding of the key features of a line of credit. Just like credit cards, a line of credit is considered to be revolving credit. This means that if you get approved for one, you’ll be given a credit limit that you can draw from on a revolving basis. As you pay off what you owe, you can continue to borrow money within your limit, as long as your account is still in good standing. With a personal line of credit, you’ll only pay interest and/or fees on the amount you borrow, not the total amount of your line of credit.
An important point to note here is that unlike certain other common types of personal loans, like installment loans, with a personal line of credit, you have more flexibility to choose when to request your money, and how much you draw. Instead of getting your funds in a lump sum, you can choose to draw funds based on when you need them.
What is an Online Line of Credit?
An online line of credit functions in much the same way as one that you would apply for from a storefront, with the main difference being that the majority of the borrowing process, if not all of it, happens over the internet. This means that you’d submit your application online, receive your funds online if you’re approved, and would likely pay back what you owe online. But why would you opt for line of credit loans online instead of from a storefront? Let’s take a look at some of the potential benefits of an online line of credit to clear the air.
3 Benefits of Line of Credit Loans Online
No two online lines of credit are going to be the same. The borrowing process and specific loan details can change based on what type of loan you’re applying for and what financial institution you’re working with. Having said that, there are some features that you might find fairly consistently across different organizations and borrowing experiences. These are some general benefits that you’re likely to find with a line of credit online.
1. Quick and Simple Application
If your savings are low and you need to take care of an emergency right away, one of the more important things you might be looking for out of the borrowing process is speed. The good news is that in general, financial institutions that offer personal line of credit loans online emphasize speed in the application process. In a lot of cases, you can breeze through a simple online application in just a few minutes. This can vary depending on what financial institution you’re working with.
When you apply for a loan in person, what does this process look like? For starters, you need to check their business hours and find a time to work a trip to their location into your schedule. You’ll then need to actually take the time to go there, wait in line, and speak to a representative. When you’re trying to juggle work, errands, family time, social time, and more, it can sometimes be a challenge to add more on top of what’s already on your plate.
When you’re looking to apply for an online line of credit, a lot of the hurdles that you might run into with an in-person loan won’t come into play. For starters, the application process can be done wherever you have internet access, so there’s no need to travel to a location, wait in line, or speak to anyone. You can do this from home, work, or on the go. While there’s a chance that you may have to speak to someone over the phone at some point during the verification process, it’s still something that can be done remotely. On top of that, depending on the financial institution that you’re applying for a line of credit with, you may be able to submit your application outside of their hours of operation. This makes it even easier to gear the borrowing process around your schedule.
3. Simple Loan Comparison
Before you ever submit an application for a line of credit, you’ll need to take the time to look at the potential options that may be available to you. This means looking at different lenders, comparing rates and terms, and looking at different borrowing options. The key is to find something that works for you on every level.
With an online line of credit, getting the information you need is easy. Generally, you just need to do a search online for lines of credit offered in your state, pull up the necessary loan details that should be laid out on their site, and compare and contrast the different options you find. It’s important you do your due diligence whenever you make a financial decision as potentially impactful as taking out a loan. Always make sure you can afford the loan you’re applying for, and if you can’t, don’t apply!
5 Steps to Apply for a Line of Credit Online
If you’ve assessed your situation and some potential online line of credit options, you might be ready to submit an application! But before you do, it helps to know how to best prepare. Here are some things you can do to make the process as smooth as possible.
1. Retrieve your Credit Score
Because of the importance of your credit score in the borrowing process, it’s a good idea to get a hold of your score ahead of time. This can help give you some clue as to what types of products might be available to you, and what the rates of those products will be. To get your credit score, you can:
- Purchase this information from one of the major credit bureaus – Experian, TransUnion, and Equifax.
- Find it online from a credit score provider. Some sites provide this free of charge.
- Check your statements as some credit card or loan providers include this information.
2. Do Some Research Online
Like we brought up earlier, one of the good things about an online line of credit is that the process of comparing different loans is simple and straightforward. Once you have your credit score in hand, go online and search for loans offered in your state. Compare the results and try to pick what works best for you.
3. Determine What you can Afford
Like we said, you should never apply for something you can’t afford, so one of the first things you should do is to work out what you CAN afford. Start by looking for a personal loan calculator online. Put in the information it asks you to enter and it should give you some idea of what your loan will cost you. You can then take a look at your budget and see if you have room for this extra expense.
4. Get your Personal Information in Order
If speed is of the essence, it might help to speed the process along if you organize your personal information ahead of time. Different financial institutions may ask for different things, but these items may come up during the application process:
- Contact information
- Proof of employment and income information
- Bank statements
- Proof of assets
- Social security number
5. Pick and Accept an Offer
Once you’re at this point in the process, it’s almost time to pull the trigger on an offer. Just make sure you don’t rush into anything. If you’ve been approved for more than one offer, carefully review all of them, make sure the lenders offering these loans are responsible, and pick the product that best suits your needs.
Apply for an Online Line of Credit
If you’re in a financial pinch and facing an emergency expense, an online line of credit can be a useful tool to have at your disposal. Just keep in mind that applying for a loan you can’t afford can have pretty substantial consequences, so it’s important you do your due diligence before you apply for a line of credit online. Research your potential options, learn more about the process, and pick what works for you!