There were already payday loans, there were installment loans – now banking companies are entering completely new areas. To facilitate the use of borrowed money, they introduced something that we already know well from the offer of banks – a credit line. Although in this case, we will call it a loan line.
What is a loan line?
In the simplest terms, it is a loan limit set on the basis of an appropriate contract, which the borrower can use for any purpose. A person taking a loan has constant access to money and decides when and how much he wants to withdraw or pay back . Each repayment reduces the debt and at the same time makes the loan limit again returns to the original amount. If, therefore, the loan limit was PLN 2,000, the client paid out PLN 300, which after a month (with interest), he returned, and the previously mentioned PLN 2,000 remained at his disposal.
The loan line can be used throughout the duration of the contract. For example, in a non-banking company, the Banknotes include such a contract for 12 months.
How to borrow?
To start a loan line, it is usually enough to register on the selected lender’s website and submit an application. The customer also immediately chooses the amount of the limit and the period in which he wants to use the money. Then the application goes to the loan company, where it is analyzed, eg in terms of the creditworthiness of the person applying for a loan.
After accepting the application, the customer receives information about the loan limit granted to him. If he decides to use it and accepts the terms of the contract, he will be able to make the first withdrawal from his loan line. For this purpose, you will usually need to log in to the account created during the registration and select the amount to be paid. After confirming your choice, the payment made by the customer will be credited to his account.
However, you will not always be able to withdraw all available funds immediately. Some companies do not allow customers to take more than 50% of the granted limit when they first pay .
However, the borrower can always make payments when he needs money. Financial resources are at his disposal at all times.
How to pay back?
Although the customer decides when to repay the borrowed money, the lenders that offer the loan line usually divide the duration of the loan limit into several settlement periods. Usually, one billing period means one month. In each billing period, the customer must make a minimum repayment .
The minimum amount is usually determined by a contract or a separate document issued by the lender. Usually, at the end of each billing period, the loan company sends information about the appropriate repayment. The repayment is made to an individual bank account created for the client.
The customer can of course pay off more than the minimum repayment. Such overpayment will be charged to repay the debt in the following month. Sometimes, thanks to such an additional fee, not only the debt, but also the amount of daily commission charged on it decreases.
Change of repayment date
In the field of payday loans, there was an extension of the repayment date. In the case of a loan line, we can apply for its change and adapt it to your needs. It is usually enough that after the payment made in the first settlement period, we inform the lender about the change of the repayment date and we will indicate another convenient date for us. However, we must reckon with the fact that such a change will cost us accordingly – eg in Euroloan it will be PLN 10.
This change can usually be made several times, which is why it is the right solution for those who are temporarily having problems with repaying the debt.
Is it profitable
The loan line can be an interesting alternative for payday loans and installment loans. As every product, however, it has its advantages and disadvantages. Therefore, we decided to point out the most important pros and cons of this product.
Advantages of the loan line
- the loan line gives you the possibility of permanent access to borrowed money (the borrower pays money whenever he wants)
- the customer decides when he makes the repayment in a given settlement period. However, the repayment can not be lower than the minimum amount
- each repayment increases the funds available on the limit, which you can use again
- the customer can freely change the debt repayment day
- the loan line can be used for a longer period (eg 12 months)
- in some cases, the loan line may be increased during its lifetime (if, for example, the client’s credit history improves).
Disadvantages of the loan line
- to get a loan line you usually have to have a positive story at the Economic and Credit Information Bureaus, and all other liabilities to pay off in a timely manner
- although the customer can repay the loan line at any time, he is obliged to make the minimum repayment once in the whole settlement period (usually every month) along with daily interest
- starting a high-cost loan line may lead to uncontrolled indebtedness.
The loan line is certainly a good option for those who need a loan with a longer repayment period. However, before we decide on it, you should consider your financial options. Are we sure that we will be able to give the lender specified in the contract an amount with interest every month?
Remember that each delay with the repayment of the loan line generates additional costs, eg in the form of payment for prompts. So before we decide to run a loan line, let’s check the terms and conditions offered by the lender. Let’s also take a look at the price list (table of fees) and only then will we assess whether we can really afford such a commitment.