Line of Credit in San Antonio
What Is a Line of Credit and How Does It Work?
When faced with a money crisis and unexpected expenses, people usually rush to secure a personal loan, which implies banks or financial institutions lending you a set amount of money, with interest rates applicable on the whole amount, regardless of whether you used a whole amount or not.
A line of credit bridges the gap between credit cards and personal loans by providing the borrowing flexibility of the former while offering the potential for lower interest rates associated with the latter.
A line of credit is a predetermined and pre-approved loan amount that you can borrow from a traditional lender up to a maximum amount (credit limit) for a set period. However, you’re only paying interest on the amount that you actually borrowed, not the amount that was approved.
Once you pay back the borrowed funds, the amount will once again become available for you to borrow, as long as you stick to the agreed terms and pay your dues in time.
Below, we further explain how a line of credit functions and how to get a line of credit in San Antonio.
How Does a Line of Credit Work?
Typically, once a personal loan is approved, the lump sum is transferred to your account, and you start paying interest on the whole amount immediately, regardless of whether you’re using the money.
In contrast, a line of credit implies an approved amount of money from which you can borrow, but you don’t actually pay any interest until you borrow the money. Once you borrow, you only pay interest on the amount you borrowed and not the whole sum that has been approved.
After you qualify for a line of credit, River City Federal Credit Union will grant you a so-called “draw period” (typically lasting several years), during which you can draw the money from your account. Once you borrow, the interest starts accruing on the amount you borrowed, and you’ll have to start making minimum payments.
These payments will be added back to your available credit line until the amount is paid back in full with interest. Once the draw period ends, you’ll enter a repayment period during which you’ll have a set time to repay any remaining debt. Note that making timely payments is crucial to maintaining your credit score.
What Are the Different Types of Lines of Credit?
Not all lines of credit are created equal, and there are different types of lines of credit. Here’s the breakdown:
HELOC
A Home Equity Line of Credit, also known as HELOC or home equity loan, allows you to borrow against the available equity in your home and use that equity as collateral for a line of credit.
HELOCs often provide access to large sums, up to 80% of combined loan-to-value; homeowners often use them for extensive home improvement projects, so they often refer to it as the second mortgage loan.
They often come with strict repayment terms and variable rates. Failing to make monthly payments may result in the loss of equity you have in your home. Some lenders offer secured lines of credit against equity in your savings account.
Personal Line of Credit
Personal line of credit is often based on your credit score, which is used to determine your eligibility, as well as repayment terms. Since they aren’t secured with collateral, personal lines of credit are often associated with higher fixed-rate interest and annual percentage rates.
However, it’s really important to note that each personal line of credit has its own unique terms. They might also be associated with additional fees, such as annual fees and closing costs.
Business Line of Credit
A business line of credit provides businesses access to funding and are usually offered as unsecured debt. Interest rates are variable, and depending on the institution, funds can range from $10,000 to $250,000 or more. In certain cases, business lines of credit are secured and require you to pledge collateral.
Business lines of credit can be particularly beneficial for businesses in the start-up phase or to support a growth initiative. River City FCU offers competitive interest rates up to $50,000.
Looking for a Line of Credit in San Antonio?
Whether you’re seeking a line of credit in San Antonio or you’re located elsewhere, we can help. First, just like with any credit approval, you’ll have to provide River City FCU with your personal and financial information, such as personal identification, phone number, address, proof of residence, proof of income, and banking information.
Afterward, the company will look into your credit score to determine your creditworthiness and approve your line of credit if everything checks out. If you’re in need of a more flexible personal loan, a line of credit might be up your alley. Call or visit a branch today to find out if a line of credit is right for you.
