How Do Personal Lines of Credit Compare to Other Financial Products?
One can compare a personal line of credit to a traditional bank loan resembling a credit card, as the former provides people with access to a specific amount of money, similarly to a card limited amount which can be used for virtually any purpose. A personal line of credit is unsecured, meaning you do not have to provide collateral to protect your lender in the event that you default. Because it is unsecured, in order to get a line of credit, one would perhaps require a credit score of 700 or above, and a good record of paying back debts in a timely way.
One can use the amount for whatever purpose they want, and in whatever sums they want, provided they do not exceed the permitted line of credit. It can be used for just about anything under the sky, but failing to pay it back on schedule could result in big financial issues.
Because risk is one of the key facets of lending in general, interest on a line of credit will almost surely be more than what it is on a home equity line of credit. While a line of credit is an unsecured form of a loan, HELOC is actually secured by your house.