There comes a time in everyone’s life where you need more money than you have. Whether you’re getting ready for a big move, planning an event, or are an entrepreneur just trying to get off the ground or expand, that time will come, and it will never be fun or easy. Trying to figure out where that money will come from is always a stressful challenge. Traditional bank loans, asking family or friends for contributions, and looking at crowdfunding sites may all be possibilities that have crossed your mind. All of those options, though, have their problems or difficulties — getting approved, overcoming your pride, unreliability. There is another option, though, one that’s flexible and reliable. That option is to look into lines of credit. 

How Does It Work?

Lines of credit tend to come in two main types, personal or business. Both share the same fundamentals, though; they are a sort of loan that allows you to withdraw funds at your own pace, as opposed to receiving the funds as a lump sum. You’ll apply for the funding the same way you would a traditional bank loan, from a financial institution, so your personal or business’s financial history and credit score will play a role. As a result, if your history isn’t great, it might be more challenging to get approved, or you can expect a lower sum or higher interest rates. 

Once you are approved, you’ll have the agreed-upon sum at your disposal from which you can withdraw as needed. During the initial draw period, you’ll be required to make regular payments that vary according to how much you’ve withdrawn, along with interest. Once the draw period has expired, you’ll no longer be able to withdraw funds, but will still be required to pay any outstanding balance of principal and interest. 

Will It Work For You?

Lines of credit can be a great option if you know that you’ll need access to funds over some time. They allow you to withdraw only the funds that you need, and when you need it, as opposed to having to guess how much you’ll need and receiving it as a lump sum. This means that you only end up using what you need, which can decrease what you have to repay. That flexibility can make a big difference if you know that you’ll need additional funds but aren’t sure exactly what the amount will be.