An unsecured line of credit is the perfect way to increase your financing and your business credit rating. If you need extra cash in a hurry, an unsecured line of credit is one of the easiest ways to acquire the money you need. What is a line of credit? It is a revolving loan that you can draw from as needed. Both business and personal lines of credit can be secured or unsecured. A secured line of credit is backed by collateral and in case of default the lending institution confiscates the collateral. An unsecured line of credit is not backed by collateral, making it a high risk to the lender and a low risk to the borrower.
Business unsecured lines of credit are best used when businesses have found themselves in a cash flow problem. The unsecured line of credit can help your business make payroll, pay vendors on time, and increase marketing initiatives to bring in more business. An unsecured line of credit can also be beneficial to your personal finances. A personal unsecured line of credit serves as the best option and provides for the temporary financial needs. This is also referred to as an overdraft line of credit. This will help protect you from bounced checks, and fees associated with them. Before looking into an unsecured line of credit, gather your financial documents and review them. Using a financial advisor for can also be beneficial if you are concerned that you will not qualify for the line of credit.
Qualifications for a personal unsecured line of a credit are:
· Credit score, 680 or higher is preferred.
· Credit history, any history of bankruptcy will be viewed.
Qualifications for a business unsecured line of credit are:
· Credit score. You need to have a rating of 75 or higher.
· Age of business. Your business needs to be established for a minimum of 2 years.
While applying for an unsecured line of credit you should check the interest rate, grace period, annual fees, and additional charges. Some financial lenders may charge a lower interest rate than others. The interest rate depends upon the lender; it is in between prime minus one percent (-1%) to prime plus 6 percent (6%). Depending on the amount of money you have in your account, along with your credit history determines the amount you can borrow. Some lenders will loan up to $25,000. Some lenders even offer free usage for the first year, and start charging from the second year.
When you are deciding if a line of credit is right for your business you will want to look at the advantages, and the disadvantages. With an unsecured line of credit, you have the advantage of borrowing money any time as you need by accessing funds instantly. Unsecured line of credit is also more flexible than loans, as there aren't restrictions while accessing funds. You also can repay more money in lump sum, as per your convenience. You can repeatedly use your line of credit, saving you the hassle of reapplying for credit. The disadvantage in choosing an unsecured loan is the limits offered are usually less than the limits offered for a secured line of credit. Due to the easy access to the funds, many people and businesses go into debt very quickly. By always keeping in mind how much you are charging and how much you are paying back to the line of credit will help minimize the risk of a large amount of debt. Having an unsecured line of credit is a financial decision you will want to look at every aspect when deciding, but it has been proven to help personal finances, and business finances.
Corporate Credit Concepts specializes in unsecured line of credit. For more information about unsecured line of credit and how it might benefit your business, please CLICK HERE for a free phone consultation.