Line of Credit Personal Loans
Have easy access to additional funds whenever you need them with a line of credit personal loan.
A line of credit personal loan may provide you with a convenient way to draw on funds as and when you need to. You can use the funds to consolidate debt, make multiple purchases or as a safety net in case of an emergency.
The flexibility of a line of credit personal loan allows you to withdraw funds up to a predetermined limit. Interest is only charged on the amount you owe, not on the entire credit limit.
Find out more about this type of loan and if it is right for you in this guide.
How does a line of credit personal loan work?
A personal line of credit works much like a credit card, in it gives you a specified credit limit to use how you like. The main difference is the limit is usually higher, while the interest rate is lower in comparison to a credit card. You don’t need to submit a credit application every time you need to make a withdrawal.
Once you are approved, the funds are there for you to use when you need them. The charges are not made against your entire balance, only on the funds you withdraw. You can even get line of credit personal loans that are linked to a debit card, which gives you more flexibility.
How to compare your line of credit loan options
If you are considering a line of credit loan, it is important to compare your options so you get the right loan for you. Here are some features to keep in mind when looking at the accounts available:
- The interest rate. Not only will you want to compare different interest rates, you will also want to learn how they are applied. Check that interest is applied only to the funds you withdraw, not on your total balance. Also, keep in mind that in some cases you may have the option of securing the loan against an asset, which may result in a lower interest rate.
- The fees. Compare fees carefully as they are not always set out as clearly as the interest rate. While a line of credit personal loan may advertise no annual fee, there could be monthly fees or an establishment fee. Make a running list of fees for each brand you are considering and factor that into your loan amount. You can use a personal loan calculator to do this.
- The terms of the loan. There are two different term types to consider. One is known as a term plan, where you have a certain timeframe, usually between one and five years, to pay off the principal of the line of credit. The other line of credit personal loan allows you to keep the loan open as long as you continue to make regular monthly repayments. This is also known as revolving credit and may be ideal if you want a funding source available as a safety net for unexpected expenses.
- How accessible are your funds? Another thing to consider with this type of loan is how you access your funds. Again, read these terms carefully. A bank may offer a card that can be used at ATMs, but there may be charges applied for this convenience. You need to weigh up the methods of accessing the funds, along with any fees associated with them
Considering the benefits and drawbacks
- You’re only charged for what you use. In most cases, you are only charged interest on the funds you have borrowed, as opposed to the total loan amount.
- You have easy access to your funds. If your account is linked to a card, you are able to draw the funds through ATMs and online banking.
- There are flexible terms. You can use the funds how and when you need to, making for a very flexible financing solution.
- Fees and charges. Be mindful that fees and charges likely apply, such as an annual fee, establishment fee or a monthly service fee.
What are the risks?
- Overspending. For individuals with little financial control, the thought of a seemingly unlimited amount of funds may cause them to make unnecessary purchases.
- Penalties. While the repayments for a line of credit personal loan are generally flexible, you should make sure you read the terms carefully. Most will expect at least monthly repayments and charge penalties if this requirement is not satisfied.
How you can applyEligibility criteria differs between lenders, so make sure to check this carefully before submitting your application. Be prepared with the following information, as most lenders have similar criteria for this part of the application:
- Income. You have to show proof of an ongoing steady income. Payslips are usually acceptable or a bank statement which shows consistent deposits from an employer.
- Liabilities. You will be asked to provide a complete list of your currents debts.
- Identification. All lenders want to see a current and valid photo ID of the applicant and in most cases you will need to provide a photocopy for their records.
- Assets. You need to provide information on property you own, plus cars, savings and investment accounts.
Read more on this topic
ANZ Personal Loans With the ability to borrow up to $40,000 for a loan term of up to 7 years, ANZ personal loans are worth considering for debt consolidation, vehicle finance or a dream holiday.
BNZ Personal Loans If you’re an existing BNZ customer, a BNZ personal loan gives you flexibility when it comes to managing your finances.
Kiwibank Personal Loans When you take out a Kiwibank personal loan, all profits stay in New Zealand. Find out more about interest rates, loan terms and features.
Nectar Personal Loans Find out how you can get instant approval and funds in your account the same day with an unsecured Nectar personal loan.
Stadium Finance Personal Loans Stadium Finance personal loans have interest rates starting at 9.95% and approval within 24 hours. Find out how you can apply.
Pronto Finance Personal Loan Review If you're approved for a loan, you could be paid in as little as nine minutes.
Loans for people on a pension Receiving a pension shouldn't stop you from getting a loan. Find out what loan options you have whether you're using Kiwisaver or getting NZ Super.
Compare dental loans If you don't have the money to pay for the dentist, why not consider a dental loan? Read this guide to find out what options you have to cover the costs of dental work, including surgery, and what lenders are available.
Compare financing options for legal fees Discover nine different ways to finance your legal fees and common costs to expect.
Personal loan fees explained We break down exactly what a lender could charge you for, how much you could expect to pay and which fees you can avoid altogether.