How a Secured Line of Credit Works
A secured line of credit is a loan borrowed against collateral. This collateral can be your car, accounts receivable; business property or something that has substantial market value. How big your line of credit is, is determined by the value of collateral placed. In case you default on payments, the lender has the right to claim the property or whatever collateral you have given.
Functions and features of a secured line of credit
A secured line of credit gives you access to large amounts of cash, which can be used for your business or for something important like tuition fees, house renovation or a big project. The interest rates on secured credit lines are usually lower than the interest rates on other types of loans. The higher the value of your collateral, the more funds you will have access to. The credit rating of your business is also an important determinant of the loan amount that you will receive from your lender. If your credit rating gets better over time, the chances of receiving a better line of credit improve as well.
The repayment terms of these loans vary according to the lender and the type of business. Most of the time credit lines issued for businesses come with an annual fee. The rate of interest on these is generally low. Some lenders permit the borrowers to only pay the interest monthly and the principal amount can be paid later as a lump sum, in a time frame that is specified by the lender. Some lenders give their borrowers flexible terms, while other charge prepayment penalties. It is vital to discuss the terms of repayment that your lender expects before getting into any agreement. If used appropriately, a secured line of credit can be very beneficial. It is always best to take advice from a financial consultant and a good broker before entering into any contract.
The benefits of a secured line of credit
€ A secured credit line is often used in businesses to manage unexpected cash flows. This is vital in order to maintain their networking capital till the dues are collected or stocks are sold.
€ It is always a good idea to shop around and look for the lowest interest rates available. Approaching more than one lender is sensible because you may come across a really good deal.
€ Secured credit lines are very helpful when businesses want to invest in buying equipment or deal with special financial tasks. It also helps businesses to retain stable operations when the market is not looking up. As this is a constant source of money, you do not have to reapply every time you are in need of funds.
€ It is always better to apply for a secured line of credit as they are easily approved. Unsecured lines are risky on the lenders part and they may not be approved as easily. Secured credit lines even provide higher limits as opposed to unsecured credit lines, which is why they are often preferred by small and medium sized businesses.
Functions and features of a secured line of credit
A secured line of credit gives you access to large amounts of cash, which can be used for your business or for something important like tuition fees, house renovation or a big project. The interest rates on secured credit lines are usually lower than the interest rates on other types of loans. The higher the value of your collateral, the more funds you will have access to. The credit rating of your business is also an important determinant of the loan amount that you will receive from your lender. If your credit rating gets better over time, the chances of receiving a better line of credit improve as well.
The repayment terms of these loans vary according to the lender and the type of business. Most of the time credit lines issued for businesses come with an annual fee. The rate of interest on these is generally low. Some lenders permit the borrowers to only pay the interest monthly and the principal amount can be paid later as a lump sum, in a time frame that is specified by the lender. Some lenders give their borrowers flexible terms, while other charge prepayment penalties. It is vital to discuss the terms of repayment that your lender expects before getting into any agreement. If used appropriately, a secured line of credit can be very beneficial. It is always best to take advice from a financial consultant and a good broker before entering into any contract.
The benefits of a secured line of credit
€ A secured credit line is often used in businesses to manage unexpected cash flows. This is vital in order to maintain their networking capital till the dues are collected or stocks are sold.
€ It is always a good idea to shop around and look for the lowest interest rates available. Approaching more than one lender is sensible because you may come across a really good deal.
€ Secured credit lines are very helpful when businesses want to invest in buying equipment or deal with special financial tasks. It also helps businesses to retain stable operations when the market is not looking up. As this is a constant source of money, you do not have to reapply every time you are in need of funds.
€ It is always better to apply for a secured line of credit as they are easily approved. Unsecured lines are risky on the lenders part and they may not be approved as easily. Secured credit lines even provide higher limits as opposed to unsecured credit lines, which is why they are often preferred by small and medium sized businesses.
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