How is interest charged for a personal line of credit?
Interest typically accrues immediately when you borrow from a personal line of credit.
A personal line of credit usually has a variable APR, which means its interest rate can change over time. Variable rate APRs tend to fluctuate with market conditions, which makes them less predictable. Ensure you understand how much a line of credit’s APR can change before applying.
How do you qualify for a personal line of credit?
To qualify for a personal line of credit, you must meet your lender’s standards for creditworthiness and income. These standards can vary from lender to lender.
Benefits of a personal line of credit
Personal lines of credit offer many advantages, including flexible access to funds that can be used for a variety of expenses.
Flexible access to funds
Personal lines of credit allow for flexibility, which can be useful if you don’t know how much you need to borrow. You can borrow against your credit limit in any amount and at any point during the draw period.
Pay interest only on the funds you use
A personal line of credit comes with an interest rate, which is usually variable. But this rate only applies to money you borrow – not the full credit limit. In other words, if you take out a personal line of credit and never use it, you won’t owe any interest.
For example, if you’re given a $10,000 line of credit and you only use $2,000 of it, you’ll only have to make payments on the $2,000 you borrowed. You can also use the line of credit multiple times, as long as you don’t exceed your limit.
Use funds for almost anything
The funds from a personal line of credit can be used for almost anything. You could use some to remodel your bathroom and some to make a large purchase.
No collateral required
Personal lines of credit are unsecured, which means you don’t have to put up a personal asset, such as a car or home, as collateral.
Alternatives to personal lines of credit
A personal line of credit isn’t the only way to borrow what you need. Here are some alternatives.
Credit cards
Like personal lines of credit, credit cards provide access to a line of credit. Credit card accounts typically stay open until you close them, although the issuer may close the account due to inactivity. So you may have access to your credit limit for longer than a personal line of credit.
Some new credit cards come with low intro APR offers on balance transfers or purchases that last for a specified period. This can make them a good tool for consolidating debt or making a big purchase, if you can pay off the balance by the end of the intro period.
Personal loans
When you take out a personal loan, you receive a lump sum upfront and pay it back in monthly installments. A personal loan could be the right option if you know how much you need, require funds quickly and can budget for the required monthly payments.
Home equity lines of credit (HELOC)
A home equity line of credit works similarly to a personal line of credit, but it lets you borrow against the equity in your home. A HELOC is a secured loan – your home is collateral – and it has a variable interest rate
Citi offers personal loans to both existing Citi customers and new Citi customers that meet specific eligibility criteria, including an established credit and income history along with additional factors determined by Citi. If you think you could benefit from a Citi Personal Loan, apply online today.
This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
