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Perhaps you require extra funds to start a business, buy a car, or purchase a home. No matter why you need to borrow money, there are two main options to consider: loans and lines of credit. Learn about their differences to determine what is right for your monetary needs.

Line of Credit

Lines of credit function the same way as credit cards. A line provides you with a specified amount of money you can borrow and spend as you wish. It typically includes a variable interest rate and requires paying at least the minimum amount on a monthly basis. For example, if you receive a $10,000 credit limit from a financial institution and spend $5,000 of it in one month, you have $5,000 left. Once you pay back the $5,000 you owe, you can spend it again. The cycle continues as long as you have the credit.

Most personal lines of credit are unsecured like standard credit card accounts. However, it is possible to obtain a secured line using an asset such as a vacation property or sizable recreational vehicle. Secured lines help boost credit ratings, while unsecured lines offer benefits such as low fees and APRs.

If you plan to remodel your home or make other significant improvements, consider applying for a line of credit. Other common uses include emergency situations, such as paying for unforeseen medical expenses, as well as overdraft protection. People with inconsistent or unsteady income can also rely on lines of credit.

Loan

Loans get distributed in lump amounts that must be repaid with interest. They are often amortized, meaning you pay a predetermined amount over a set period. Mortgage, student, and vehicle loans fall under the amortization umbrella, such as paying $200 a month to pay off a student loan. Secured loans require collateral, such as real estate, while unsecured loans do not. And while secured loans come in larger amounts, unsecured loans do not risk asset repossession if you cannot pay them back.

In addition to paying for student, mortgage, and car expenses, you can apply for a loan to consolidate debt or start a business. People often take out loans not only to front new business expenses, but to purchase more inventory and equipment, hire additional staff members, obtain capital, or manage daily operations. 

 

You can count on Hawaiian Financial Federal Credit Union for all your loan and line of credit needs!  With hundreds of millions of dollars in assets and over 60,000 members across Hawaii, Hawaiian Financial Federal Credit Union is one of the leading financial institutions in the state, with a reputation for combining personalized service with technologically advanced personal banking solutions. Learn more about our broad range of services online, and follow us on Twitter and Instagram for news and updates. You can also call (808) 832-8700 on Oahu or toll-free at (800) 272-5255 with any questions.

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