Asked on 26 Nov 2019
I need some emergency cash for personal use. I did my research about personal loan vs line of credit. From what i read, a personal loan has higher interest than a line of credit. So my qns is should i still go for line of credit and how does it work?
Before you make any decision, I will strongly encourage you to analyse your cashflow and finances again and see if there is any way we can shift money around to resolve your need.
Next, determine if it is a secured loan or an unsecured loan. Accordingly, this will determine if you need to pledge any form of asset in order to get the loan approved. At this stage, be very cautious on what you pledge - think of the long-term consequence.
Once you have decided and the line of credit is approved, you can draw up to the pre-determined limit. For instance, the approved amount is $100k. However, you need only $10k. As a result, you draw $10k out of $100k for your needs.
In any case, take some time to do a detailed calculation on the effective interest rate, loan tenure, fees and charges (including early and late repayment fees). Then work out a repayment scheme for yourself and ensure that you are able to commit to it fully.
Once you have a repayment scheme worked out, then take up the loan. Either way, do not commit into something that you are not confident to repay. Otherwise, you could really get stuck for a long time. Therefore, please be merticulous in your calculations!
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