Benefits of an Online Line of Credit

When an emergency expense strikes, what do you do? Do you tap into your mounds of savings and take care of it without a hitch? Or maybe you have an emergency fund specifically designated to help in these circumstances. The truth is, with only 39 percent of Americans polled in a 2021 Bankrate survey being able to handle a $1,000 unexpected expense, the majority of Americans may not have the easiest time dealing with the financial fallout of an emergency[1].

If you get caught up dealing with an emergency without the funds to handle it, it’s not the time to panic. With all the online borrowing options out there, there’s a good chance that you may be able to find the funds you need to get you through this tough spot.

The problem is, if you don’t know much about online loans in the first place, it can be tough to know which option is best suited to your situation. To help you make an informed decision, we’re going to go over some of the potential benefits of one of the more common personal loans out there - an online line of credit (LOC). We’ll start by defining them in simple terms and then run through some of their key benefits.

What is an Online Line of Credit?

If you have at least one credit card sitting in your wallet, you probably have some familiarity with how revolving credit works. How does this tie into your understanding of a personal line of credit? Well, a line of credit is also a type of revolving credit, so there’s some overlap between these two borrowing options.

If you’re approved for a line of credit, you’ll be given a credit limit similar to what you get with a credit card. If you run into an emergency expense, you can tap into your line of credit and draw however much money you need, up to your available credit. Keep in mind that you can only do this if you have credit available and your account is in good standing.

What do we mean by good standing? Well, the main thing you need to do to maintain a healthy credit account is to pay back what you owe before the due date, or before the next billing cycle starts. If you’re not missing payments, you should generally be okay. You’ll usually also have the option of making a minimum payment instead of paying off what you owe in full. This will be a portion of the total amount due on your account, and by making this payment on time, you can keep your account in good standing without having to pay the full amount. Having said that, it’s always a good idea to pay down as much of your line of credit as you can in order to avoid the continuous build up of interest. It should also be noted that with a personal line of credit, you only pay interest and/or fees on the amount of credit you’ve used, not the total amount of the line of credit limit.

While there are a few different types of lines of credit out there, like business LOCs, home equity lines of credit (HELOCs), and more, our main focus is going to be on personal lines of credit that you apply for and manage online. But why would you apply for a loan online instead of in person? Let’s find out!

4 Benefits of a Personal Line of Credit Online

Person looking up an online line of credit on their laptop.

1. Faster Application Processes

When you have to take care of an emergency expense, the last thing you want to deal with is an application that takes you a while to fill out. When you’re looking to apply for a personal line of credit in person, there are certain parts of this process that are unavoidable. For starters, you’ll need to carve out some time in your day to travel to a storefront location. While this may be convenient for some people who live or work near a lender, this won’t be as straightforward for everyone. Once you do get to a storefront, you’ll need to wait in line to speak to an associate. You’ll then finally get a chance to fill out an application.

person looking at their watch on their wrist.

With line of credit loans online, a lot of the minutiae involved with an in-person loan is cut out. There’s no travel time required as you can apply online from your home, during your break at your workplace, or anywhere you have internet access. On top of that, generally, the actual application for a lot of lines of credit online are quick and straightforward. For example, you can submit a request for a personal line of credit through CreditFresh in just a few short minutes. When time is of the essence, applying for a line of credit online may be the right choice for you.

2. Access to Researching Borrowing Options for Bad Credit

Having bad credit when you’re facing an emergency expense can sometimes make your situation feel a little dire. After all, your credit score is sometimes a key factor that financial institutions use to decide whether or not to lend you money, so how can you expect to get approved for a loan when your credit score isn’t up to snuff? Well, when it comes to some loans, even in cases of online loans, your credit score may not always be as important of a factor as you may think.

In the case of applying for a loan with some financial organizations that provide or service online loans, you may have an easier time doing research from the comfort of your home. You won’t have to worry about going from storefront to storefront to inquire about which option may be right for you. You may find it even convenient to browse through websites of different financial institutions and look for one whose main focus when determining your creditworthiness may not necessarily be your credit history. Instead, you may come across some who shine a bigger light on certain factors like:

  • Your level of income
  • Your employment status
  • Where you live

Because of the convenience in the research process, you may still be able to find an online line of credit for bad credit which you qualify for. This can be good news for anyone who needs fast funds for an emergency but may not have the best track record when it comes to their credit history. Just remember that one caveat of these types of loans is that because the financial institution may be taking on more risk when lending to you, the rates and fees generally tend to be steep. So, only apply for an online line of credit for bad credit as a last resort.

3. No Time Restrictions on your Application

Like we mentioned earlier, there can definitely be some hurdles to navigate when you apply for a line of credit in person. One of these potential issues is that in order to submit an application, you’ll need to work around their business hours. This can be tricky for people who have a busy work schedule and don’t often have much time to spare during the day.

When you apply for line of credit loans online with certain financial institutions, this may not be an issue. In addition to having a fast application process, a lot of organizations that service loans online have applications that can be started any time of day or night. This means that you don’t have to find a way to carve out time during the day to go to a physical location to submit a loan application.

4. Flexibility

While this may not be something that’s specific to line of credit loans online, it’s an important characteristic of lines of credit that’s worth mentioning.

Like we’ve already mentioned, a line of credit is a revolving form of credit. This means that you can use it on a continuous basis and you generally won’t need to submit another application every time you need money. On top of that, you have the freedom to draw exactly the amount of money you need as long as you have available credit.

Two people stretching in their living room.

So, if you’re facing an emergency expense that’s going to cost you $400 and you only need $100 to fill in the gap between the amount you need and the amount you have in your emergency fund, a personal line of credit can help you fill that gap. Because you’ll only be paying interest and/or fees on the amount you’ve borrowed, drawing funds may be a preferable option to applying for a fixed-term loan where you’ll receive a lump sum that may be more money than you need.

Consider a Personal Line of Credit Online for Emergencies

Dealing with an emergency can be a scary prospect, not the least of which is dealing with the financial component. While having an emergency fund is generally the best option to staving off the damage that an unexpected expense can do to your finances, these aren’t always the easiest things to put together. It takes time to build up a big enough emergency fund to feel comfortable in dealing with most emergencies, and it can be even harder when you don’t have much money to spare.

Opting for an online personal line of credit in times of emergency can be a good backup plan when your savings are running low. With a fast application and a convenient borrowing process, you may be able to get the funds you need quickly to handle your expense. Just make sure to do your research, assess your options, and find something that works for you!

Disclaimer: This article provides general information only and does not constitute financial, legal or other professional advice. For full details, see CreditFresh’s Terms of Use.


Posted in: Line of Credit Online Loans