In researching ways to borrow money from an online lender, you’ll find that you have the choice between two financial products: there are one-time loans and lines of credit at your disposal. Neither product is inherently good or bad, as they require you to use them responsibly in order to receive their full benefit. But they each have their own set of distinctive features that make them more appropriate for different situations. In knowing how they differ from one another, you can be better equipped to tell which product is best for your financial situation.
Both small dollar loans and lines of credit provide you with cash for when your monthly income doesn’t match up with your expenses. However, their limits and their terms are what set them apart. A one-time loan consists of a small cash advance that typically falls between $200 and $500. It’s given all at once, and its repayment is prearranged according to your pay schedule. Interest accrues, and the entire principal and the associated fees are due at the predetermined date. Failure to do so results in additional fees and further interest accrued. These loans are better for small, one-time hiccoughs in your budget. Many Americans use these loans as a way to help pay for surprise expenses like auto repairs and trips to the dentist.
Lines of credit, on the other hand, provide a much more flexible access to money. They’re also typically larger than their small dollar loan counterparts, as your options for line of credit personal loans are upgraded to $1,000. While you have access to the entirety of the advance, you’re only charged interest on the amount that you use. This interest, plus a minimum payment, is due once you start charging your line of credit. Repayment is set according to a schedule determined by your online lender. Because these lines aren’t fixed like one-time loans, they’re a better solution for a series of expenses you need to make over a longer period of time. You may also want to use it for a singular charge and rest easy knowing you have the remainder of your credit waiting in case of an emergency.
There are a few minimum requirements that are needed in order to qualify, and these stipulations will differ depending on where you live as each state has its own set of rules regarding both small dollar loans and lines of credit. If you meet these requirements in your state, remember to fully evaluate the terms of your financial product. Don’t be afraid to ask questions of your online lender to determine if a line of credit is truly the best product for your situation. Knowing these answers can help you make a financially responsible choice.