In addition to traditional payday loans on the non-bank market, there are also other forms of quick financing of customer needs. One of them are the title loan lines. Today, a few words about the nature of this product and the benefits of such a solution. Non-bank institutions currently offer us four types of products: payday loans, installment loans, social loans and loan lines. The latter, however, are still talked about the least, which is a pity, because they can be an interesting alternative to already popular payday loans. Those who have used (or continue to use) bank loans have probably met with something like a credit line. Loan lines operate on very similar principles.
Loan facility – operating principle
Based on the relevant agreement, the lender launches a certain loan limit, to which the customer has permanent access. He does not have to use the whole amount at once, but only reaches for some part of the money when he needs it. To better understand the mechanism of operation of loan lines, let’s take an example. Let’s assume that the lender activates a limit of $ 3,000 for a client for a period of 12 months. The client takes this limit only $ 500. He still has $ 2,500 at his disposal, which he can withdraw at any time. On the other hand, interest is charged for $ 500. When he gives back the amount borrowed, together with interest, he will be able to use $ 3,000 again for the entire duration of the contract.
Advantages of using a loan line
As you can see, the loan line gives us constant access to cash. All we have to do is submit an application and provide the amount we are interested in. If the lender agrees to a loan of this amount, a limit will be triggered from which we can immediately withdraw money. This solution saves time. We sign a contract, e.g. for a year, and we can use cash whenever we want, without having to go through all the formalities again. The liability is repaid on any day chosen by the customer. Of course, the loan line has settlement periods in which it is necessary to fit in, but it does not require the customer to pay back immediately, as much as from the limit he borrowed. There is usually a minimum amount that must be paid back to the lender over a given period. Lenders offering this type of product see no problem when the customer needs to change the date of the last day of the billing period. Thanks to this, even if we have any financial changes, we can adjust the repayment deadlines to your needs.
Disadvantages of using a credit line
In addition to many advantages, the loan line may have its disadvantages. To use such a product at all, we must have a very good credit history and pay all our current liabilities on time. When using a loan line, you should also remember to pay the minimum amount regularly. Each payment from the limit is charged with interest, which ultimately makes up the cost of our loan.
The loan line is a great option for those who need permanent access to more cash. However, we must remember to use it wisely. Before releasing the loan limit, let’s calculate our financial capabilities well and use this product only to the extent that we can easily repay the debt.