Do you know the first thing about an unsecured line of credit? This is something that you can rely on both as an individual or a business owner. Either way, a line of credit gives you access to the funds necessary to complete a particular task or project.
For individuals, an unsecured line of credit may be used for something as simple as a home repair or upgrade. For a business owner, on the other hand, this type of financing is perfect for expanding or marketing and advertising.
Benefits of a Line of Credit
One of the biggest benefits of a line of credit is that you only have to borrow the money you need at the current time. For example, you may have access to $50,000 but this does not mean you have to borrow all the money at once. In turn, you only have to pay interest on the funds that you actually take from your line of credit. This is one of the biggest advantages when comparing this type of financing to a loan.
What is it about unsecured lines of credit and unsecured business loans that make them so common? In this case, the word unsecured means that you are not required to put up collateral. In turn, if you default on the line of credit or loan the bank does not have the ability to take the collateral from you.
While an unsecured line of credit is less risk, since you don’t need any collateral, there are some drawbacks that you need to be aware of. For example, you are going to pay a higher rate of interest. This is necessary so that the bank can protect itself against the risk of non-payment.
Here are three reasons to rely on an unsecured line of credit:
- Allows you to take the money you need when you need it
- Helps you better balance the ups and downs with your business
- Fast and convenient – you have access to the funds without delay
With an unsecured line of credit you can expect all of the following:
- No collateral required
- Low minimum payments, especially if you only borrow a small portion of the money
- No fees
With many benefits, an unsecured line of credit may be the best way to improve your business in an overall sense. This will give you the necessary funding, on-demand, to deal with a variety of circumstances.
Chris Fuller went to the University of South Florida and has worked in the financial sector for over 20 years. He has extensive experience in all aspects of personal and small business lending, from personal loans, equipment finance to cash flow based solutions for small mom and pop businesses, and large corporations.