Throughout your life, you may run into a circumstance or two where additional funds may be beneficial. In these circumstances one of the things you could do is take out a personal loan or a personal line of credit.
Before doing so, it is important to educate yourself about personal loans and personal lines of credit, along with clarifying any other questions you may have. Below we have outlined some of the most common questions about personal loans.
What is the difference between a personal loan and personal line of credit?
Personal loans and personal lines of credit are two ways to borrow money that typically don’t require collateral like a home equity line of credit would. The difference between the two is that a personal loan gives you a sum of money upfront and requires fixed monthly payments throughout the fixed loan term while a personal line of credit can let you withdraw as much cash as you need at any point in time and pay it back on your own timeline with a variable interest rate.
What should I use my personal line of credit for?
A personal line of credit could be used for a variety of reasons, but some of the most common reasons include ongoing projects like home improvement, overdraft protection, emergencies, and as a supplement to your regular income in months where you may need a little extra cash. If you are unsure of how much money you need to borrow in total or how often you will need to borrow extra money, a personal line of credit can be a flexible option for your finances.
What is the advantage of a line of credit over a regular personal loan?
One of the main advantages of utilizing a line of credit over a personal loan is that with a line of credit you can use it on an ongoing basis. With a personal loan, you borrow a lump sum of money at one time and then make monthly payments for a set amount of time to pay the loan and the interest back.
With a line of credit, you can borrow multiple times, so you do not have to know the exact amount of money you will need to use upfront. The line of credit will usually have a total maximum amount you can borrow.
Does a personal loan or line of credit affect your credit score?
Yes, both personal loans or lines of credit will affect your credit score because both require payments towards them once you begin borrowing money. Missing a payment can hurt your credit score, so make sure you can plan to make on time monthly payments before you begin borrowing.
Personal loans or lines of credit can be good tools to utilize in a variety of different financial situations.
Interested in a personal loan? Apply today!
It can be challenging to balance your savings, loans, and other accounts all in one place. However, we offer many ways to help manage your finances at Camino Federal Credit Union through online banking and mobile banking app. Please give us a call at 800-835-3400 to speak with one of our Member Advisors, or contact us online at caminofcu.org for more information.