Sometimes the unexpected happens – roofs leak, trucks break down, you have to travel last minute to visit an ailing relative…the list goes on.
When sudden costs come up that are outside your monthly budget, it can be helpful to have a flexible way to access extra funds without relying on credit cards or savings accounts.
So, when things go sideways and you need a little extra cash consider adding a line of credit to your family’s financial toolkit.
What is a line of credit?
A line of credit allows individuals and businesses to borrow money up to a predetermined credit limit and use it in a “revolving” manner, withdrawing and paying as needed.
Simply put, unlike a loan which has a fixed repayment term, a line of credit allows you to make withdrawals and payments in a more flexible way, without set dates or timelines. They can provide flexibility and convenience, as you can access funds whenever you need them up to the approved limit, and you only pay interest on the amount you borrow.
If you are in need of a line of credit to help with a one-time or unexpected expense like a home renovation, vehicle repair or professional development courses and you don’t want to rely on a credit card, talk to a credit union near you (you can find one here).
Credit unions offer the same products and services as other financial institutions, but often with lower interest rates and service fees.
You can head over to 1st Choice Savings and Credit Union, a full-service financial institution based out of Lethbridge, to find out more about why credit unions are a great option for your family. 1st Choice offers personalized tools and solutions to help you reach financial security and prosperity and their compassionate staff are committed to providing high-quality financial services. At 1st Choice (or any Alberta credit union) you will find a variety of options for people who need access to more credit, from personal lines of credit to ones for students, business owners and homeowners.
Learn more about 1st Choice here and reach out to them to get the process started, or review the how to get a line of credit steps below!
- Research the different banks, credit unions and other financial institutions in your area that offer lines of credit. Check out their websites to find the offerings that are available, and any details provided on terms and interest rates.
- Next, review the eligibility criteria (if provided on the site), call the customer support line or visit the closest branch to learn more. Typically, to get a line of credit a credit union will consider factors such as your credit history, income, employment stability and existing debt obligations to determine whether you are eligible for more credit and how much.
- Once you have selected a credit union, collect your documents and begin the application process, either in person, over the phone or online. This usually requires completing an application form and sharing personal and financial information, as well as providing copies of your identification, proof of income and financial statements.
- After the application process has begun, the credit union will review your credit history and credit score. They also check for any outstanding debts to determine if you are a good fit for the product and the ability to repay the line of credit. A positive credit score and history will increase your chances of approval and having favorable terms and rates, so if don’t know your credit score check in advance with companies like Equifax, Borrowell and TransUnion.
- Next, the credit union will evaluate your application to determine if you are approved and the credit limit and interest rate you are approved for. If approved, they will also review terms and associated fees with you. Once you are approved and you agree to the terms, your line of credit will be activated and you can begin to access the funds as needed, usually via online banking, a mobile banking app or even sometimes with a dedicated line of credit card. Be sure to take note of the date on which interest is due to ensure you do not miss any interest payments, which can impact your credit score.
- As a line of credit is revolving, you can withdraw and make payments when it makes sense to you, as long as you make the minimum interest payments each month. Be mindful of not overusing or relying on a line of credit, however, as it can be difficult to pay back if it grows to be too large. A good rule of thumb is to plan for how you will repay any credit you have in advance using it.
Have questions about lines of credit? Contact 1st Choice Savings and Credit Union or find a credit union near you here.