Money 101  >   Personal Loans   >   When Should I Use an Online Line of Credit?

schedule 6 min read | June 25, 2021

When Should I Use an Online Line of Credit?

Written by Daniel Azzoli

It would be nice if you could snap your fingers and make any emergency expense that comes your way disappear, but unfortunately, that isn’t the world we live in. The truth is, a lot of us may not have thought ahead for that nearly inevitable moment when an unexpected expense comes out of nowhere to throw a wrench into our finances. When something like this happens, you’ll want to deal with it right away to stop the bleeding.

The best thing you can do to prepare yourself in case of a financial emergency is to build an emergency savings fund ahead of time. The problem is, you can’t build one of these overnight. If you’ve never contributed to an emergency fund before, or yours isn’t big enough to pay for your entire emergency expense, an online line of credit might be the safety net you need in this scenario.

Having said that, any time you’re considering applying for a loan, you’ll want to make sure of a few things. Firstly, you’ll need to ensure you’ll be in a good position to make all your loan payments on time. After all, you should never apply for a loan you can’t afford. Secondly, you’re going to want to make sure that you’re applying for a loan, such as a line of credit online for the right reasons.

But what constitutes the right reasons in this case? Well, we’re going to break down what an online line of credit is, and then go over some common scenarios where you might want to consider applying for one.

What is an Online Line of Credit?

A line of credit is a personal loan that works a little differently than certain other types of personal loans, like an installment loan for example. With an installment loan, your funds come in a lump sum which you’ll then need to repay with interest and/or fees over the course of several scheduled payments. If you get approved for a line of credit, you’ll gain access to a specific credit limit that you can draw any amount of money from, up to your credit limit. You can only do this if you have credit available and if your account is in good standing. As you pay off what you owe, you can draw funds again without having to reapply for a personal loan. When it comes to the interest and/or fees that you’re charged, you’ll only be charged on the amount of money you’ve drawn, not the total amount of your line of credit limit.

Person looking at their phone looking up an online line of credit.

When it comes to an online line of credit, the majority, if not all of the parts of the borrowing process will happen online. This means you’ll fill out and submit your application, get approved, receive your funds, and pay off what you owe online. There may be certain components that will need to happen over the phone depending on the financial institution you’re working with.

Opting for line of credit loans online can be helpful for anyone who doesn’t have time to go to a physical location to apply for a loan, or for people who generally prefer the convenience of an online experience.

3 Common Scenarios Where you might Apply for a Line of Credit Loan Online

While there are different types of personal lines of credit that can be used for different purposes, the main focus of this list is going to be on scenarios where you need to deal with an emergency expense. While there are plenty of different situations that could constitute an emergency, here are some common scenarios that might crop up over time.

1. Unexpected Car Repairs

Is regular car maintenance hard for you to deal with financially? If not, that’s great! But regular maintenance isn’t exactly what we’re talking about in this situation. In fact, when we talk about when to consider using line of credit loans online, regular or recurring expenses don’t fall into this category.

In this situation, we’re talking about unexpected car expenses that come out of nowhere. For example, picture your car dashboard. Have you ever seen that small check engine signal light up? When that happens, you might feel like you can’t be bothered to deal with whatever is going on in that moment. But fast forward a few weeks, and maybe you start to hear an unfamiliar rumbling coming from your engine. This is something that’s probably going to be harder to ignore. So, you take your car into the shop and get hit with a big bill.

There are times when you might run into some car problems that come completely out of the blue, but in scenarios like the one we just outlined, dealing with the problem right away can help to mitigate some of the cost. So, if your car is telling you something is off, take it in right away to see what needs to be done. If you don’t have the funds to pay for the entire repair out of pocket, you can consider applying for a quick online line of credit. The fast and simple application process of a personal line of credit online may be what you need to take care of your emergency expense right away.

2. Surprise Medical Costs

The cost of emergency healthcare may not be something at the top of your mind if you’ve had a fairly clean bill of health over the years. But if you’re caught financially unprepared when/if you do run into some sort of unexpected medical expense, it’ll likely cost you a pretty penny. This goes for anything from an unexpected trip to the emergency room, a surprise dental expense, or even a trip to the vet for your pet.

Doctor crossing their arms.

If you want to avoid the financial fallout of being caught unaware in an emergency situation, you should try to save up ahead of time. See if you can find a little extra room in your regular budget to put towards your emergency fund, or even to set aside specifically for emergency medical expenses. But if you do get hit with a medical expense and your savings aren’t enough to take care of it (or you don’t have any in the first place), then maybe you can apply for a line of credit loan online to help you out. But before you do that, you may also want to consider:

  • Seeing if there are any financial aid programs that could help you out.
  • Trying to negotiate a lower cost with the hospital or doctor’s office.
  • Working out some sort of payment plan to ease the financial burden.

3.  Unforeseen Home Repairs

Did you think that once you bought a home, it was going to be smooth sailing from there on out? You may want to rethink that stance. The truth is, even after you feel the relief of making that large down payment and moving in, there are still all sorts of housing costs that come after that. One thing that not everyone accounts for are the emergency fixes that’ll likely creep in over time. This can include things like:

  • Leaky water pipes
  • Rot
  • Mold
  • HVAC repairs
  • Cracked windows
  • A faulty water heater

While these issues can come out of nowhere, the more prepared you are, the better. See if you can set aside a bit of money on a regular basis to go towards future home repairs and do your best to keep up with your regular house maintenance. If you can manage to stay on top of small and relatively inexpensive repairs, you may end up saving yourself a lot of money in the long run.

water pipes in a house.

Having said that, there are certain emergencies that could come out of nowhere without there having been anything you could do to nip them in the bud. In these instances, you can apply, and if approved, you can tap into your online line of credit to help you pay for these emergency expenses. Keep in mind that your personal line of credit shouldn’t be used to remodel your bathroom or install new kitchen tiles. If you’re looking for a loan to help you pay for some cosmetic upgrades, look into whether something like a home equity loan or line of credit would be right for you.

Consider Using an Online Line of Credit for Emergency Situations

Trying to take care of an emergency is never easy, and things tend to get more complicated when you don’t have a lot of money saved up to play around with. It’s tough to find ways for dealing with surprise expenses when your savings have run dry but putting off a repair would only lead to a bigger expense down the road.

Just remember that if you find yourself in this type of situation, there may be options out there to help get you through. Applying for an online line of credit might just be the safety net you need the next time you’re facing an emergency expense.

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.

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