When it comes to financing large purchases or long-term projects, it’s not always feasible to pay cash up-front. While credit cards can help, their high interest rates make funding your purchases more expensive in the long run. Traditional loans typically offer lower interest rates, but the large influx of cash into your bank account may make it difficult to track how much you spend. If you’re looking for more flexibility, a line of credit may be your best option. Here’s what you need to know about the process.

A Brief Guide to Lines of Credit

What Are They?

A line of credit is a type of loan used to tackle large and unpredictable costs. There are a few reasons someone might choose this over a traditional loan. Traditional personal loans are issued in an exact dollar amount and paid out up-front. Once borrowers receive the funds, they’re expected to start paying the loan back immediately following the grace period.

A credit line from a local bank, on the other hand, allows you to borrow money as you need it, much like you would with a credit card. But unlike most credit cards, the interest rates on lines of credit are generally low, and limits are typically high. There is no money paid to an account up-front — instead, lines of credit let you borrow the amount you need when you need it. In addition, you only have to make payments on the amount of credit that you use.

How Do You Apply?

You apply for lines of credit through a bank rather than a credit card company. The bank may look at your credit score as well as the property you’re willing to list as collateral to help them determine whether or not they will issue you a line of credit. The higher your credit score, the more likely the financial institution will be to issue a line of credit. 

What’s the Next Step?

Once you’re approved and the line of credit is set up, you can use it to purchase items or pay for services just like you would with a credit card. Each month, you’ll be expected to make payments on the amount of credit that has been used, making it more affordable and giving you more control over monthly payment amounts. If you’re financing a large project, school tuition, or any other purchase that’s happening over time rather than all at once, a line of credit is a smart financing option. 

Both personal loans and bank-issued credit lines are great ways to fund projects for homes and businesses. If you’re interested in lines of credit, contact First State Bank of Russellville in Pope County, AR. They’ll work with you to determine which financing option will best suit your needs. Whether you’re looking to purchase an RV for family vacations or simply want to cover the cost of long-term home improvement projects, they’re ready to help. Learn more about their services online and call (479) 498-2400 to schedule an appointment with a lending specialist.