Unsecured Line of Credit Guidelines
An unsecured line of credit is similar to a loan except that it does not require any collateral. The line of credit can be either personal or business. Unlike a loan that requires collateral, a line of credit replenishes principal with each monthly payment. In addition, lenders give borrowers a checkbook to make purchases as the need arises.
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Personal Line of Credit
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A person can qualify for this line of credit without official documentation of income, assets or appraisals, and without any collateral. However, you do need a good credit score and conservative debt-to-income ratios. Unsecured lines of credit are now sought by people who would normally use the home equity line of credit with their home as the collateral
Business Line of Credit
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The business line of credit is a cash reserve, usually placed in a separate bank account. The owner uses this cash to meet financial obligations in a timely manner, address cash flow problems or even take advantage of a special offer. A line of credit could meet payroll, make payments to vendors or buy inventory. The unsecured line of credit has no limits on the method or timing of use of these funds.
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Line of Credit Guidelines
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There is one important difference between the personal and the business lines of credit. Approvals for the personal line range from $2,500 to $50,000 with low interest rates. Business lenders require the borrower to take a minimum of $10,000 with an upper range of six or seven figures.
When a lender approves either line of credit, money is available quickly and with low interest rates. This makes the unsecured line of credit more appealing than a credit card.
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