Online credit line
The growing demand for opening credit lines has made it possible to apply online.
Unlike online loans and microcredits, which are granted by private credit institutions, online credit lines have begun to be granted mainly by conventional banking entities, being aware of the large market currently existing for them.
The economic situation has led to employers and self-employed workers having seen the need to have a line of credit to cover their business expenses when they do not have cash at a specific time.
But what exactly is a line of credit, and what is it used for?
In this article, you will see the following information:
- Line of credit, what is it?
- Characteristics of a credit line
- Advantages of the open credit line
- Explain your differences with a loan and help you differentiate when it is a good option to hire each of them.
- Other alternatives such as the line of credit between individuals and companies.
- … and much more!
Meaning of a line of credit
A line of credit is a highly requested financial product due to its flexibility.
Despite not being well known among individuals, it is a good financing option for companies that need cash at a specific time when they do not have solvency.
Defining them briefly, we can say that a line of credit is an extension of money that a banking entity makes available to a client that requests it, during a certain period of time and with a maximum limit of money, previously agreed in the application.
With a line of credit, the holder of the current account or card has a limited amount of money, which can be used partially or completely until the renewal date, usually at the beginning of each month.
The customer can use his credit line whenever he wants, within the limit of available money.
How can the Bankate service help your online credit line?
Bankate compares financial products online, and provides you with an updated list of the best personal loans and online credit lines in the Spanish market.
Our service is especially useful when it comes to finding the most profitable online credit lines, as we detail the conditions, interests, requirements and advantages of each of the loans included in our list.
In addition, we inform you of everything we believe necessary, such as if the lender charges additional fees or if you must take out insurance. With us there are no surprises, no small letters
The service we offer is completely free and not binding. Your free online microcredit will not be more expensive if you request it from our website, on the contrary:
You will ensure that you are accessing the website of a reliable and secure lender.
If you wish, you can read more about our service or the way we work.
Frequently asked questions about credit line
What is a line of credit?
With a line of credit, the customer has an amount of money for a certain time, which he can use whenever he needs it within the limit of money available until the renewal date.
For what purpose is a credit line contracted?
The main purpose when hiring a credit line is to have a more flexible monetary feature in the day-to-day daily expenses.
How to increase my line of credit?
To increase your credit line you have to contact the bank and request this increase. They will decide whether it is granted or not.
Quick loan or line of credit?
It depends on your needs. If you have to face a debt, a quick loan is more convenient. On the other hand, if you need a little more economic flexibility, a line of credit is advisable.
How to request an online credit line
Time needed: 20 minutes.
Currently, applying for a credit line is very easy. Follow the next steps:
- Fill out an online application form
In doing so, we provide the personal data necessary for the lender to begin the analysis of our credit profile.
- Sending the necessary documentation
To verify the data when the application is approved.
- Read the contract and accept it
When checking the data, you will be sent an online contract that you must accept.
- Transfer of money to your account
By accepting the contract, the money will be transferred to the account number provided.
How does a credit line work?
In practice, a line of credit is a kind of checking account with money that the bank provides to a customer, when he does not have enough liquidity to finance his expenses.
This type of financing is mainly used by companies and freelancers, allowing them to pay payroll, checks or additional expenses, even if they do not have enough money at that time.
The operation of a credit line is simple:
It is only used when there is not enough money in the current account of the holder.
That is, if the time comes to deal with an invoice, and the client does not have enough liquidity to pay it in full, the money from the credit line is used to face the payment of the same while it is still within of the available limit.
At the moment in which the balance in the applicant’s bank account is not available, the credit line amount begins to be used automatically.
After that, once a balance is available in the bank account, a transfer is made to the credit line to settle the debt of the same.
How do I return my credit line money?
Once the established period of time ends, the holder must return the initial amount available on his credit line, plus the interest corresponding to the use thereof.
As for the return fees, it depends on the financial entity to which the credit line is requested. The return fees can be set at an equal amount for all months regardless of the credit consumption made, although, on other occasions, the customer only pays based on the money that has been used.
Additionally, the bank may charge interest on opening or using the credit line.
With a line of credit, the client pays interest only for the amount of money he uses, which makes it a good financing option for companies and self-employed workers.
However, this feature will depend on the entity with which you request your credit line, since some of them charge for the money that has been available, not for which it has finally been used.
Line of credit for companies
Credit lines are the perfect financing solution for companies that, despite being profitable, record very irregular income.
For businesses that record their income only once every several months, for example, a line of credit can compensate for existing financing gaps at a specific time, thus helping to cover the expected payments in a short period of time.
In this way, companies have available capital at all times, being able to use only the amount strictly necessary to finance their payments.
Thanks to this, a company can face the payroll payments of its workers, the payment to suppliers or make the purchase of materials or tools of importance to develop the work activity, despite not having liquid money at the moment of facing payment.
In addition, it is a very comfortable and easy to handle solution, as it is presented as a simple checking account and is used as such while there is no balance in the principal account of the holder.
Read more about freelance loans here.
Line of credit for freelancers
As with companies, as mentioned earlier, credit lines can be a good option for self-employed workers who need to pay certain payments at a time when they do not have enough cash.
When granting a line of credit to a self-employed worker, the bank carries out a solvency study, which determines whether the applicant is able to meet the credit line reimbursement, and calculates the maximum amount of which you will have availability. After that, entities can charge study fees.
Credit lines serve the self-employed to meet timely payments in times of low liquidity.
However, we must take into account the situation in which the self-employed person is in order to know which is the financial product that suits us best: if we need to face an unforeseen payment in a unique way, and we believe it is a situation passing, perhaps a microcredit could be a better option.
A good alternative for freelancers to a line of credit is the Cofidis loan, with access to a flexible amount of up to € 4,000 possible in less than 24 hours.
Credit line for individuals
The main characteristic of the credit line for individuals is that the concession criteria are not as hard as the credit lines for freelancers or companies since we do not have to give information about our business or business project.
What should be done is to meet a minimum condition:
- Be of legal age: be over 18 years old. Some companies may ask us to be 21 or 25 years of age. It depends on the risk policies of each entity.
- Reside in Spain permanently
- Have income: have, for example, a payroll that justifies the payment of monthly fees
- Not having outstanding debts registered: If you are registered with Credit institutions or Badexcug, you will have limited financing but you have other types of fast loans (see delinquent list).
Being an online product, the analysis of your application will be carried out quickly and safely and we will know if we are preapproved in a few minutes.
In the following table we show you the banks that allow you to request a credit line with 18 years:
When is it a good idea to hire a line of credit?
It is a good idea to hire a line of credit when it is a company with unbalanced income flows, which needs to deal with payments on a regular basis and does not have the necessary liquidity when executing payments, although it awaits entry of income in a short period of time.
It is also advisable to hire a line of credit in a particular if you are going to need irregularity but frequent liquidity, so it is necessary to have the possibility of having a cash loan continuously for a certain period of time.
However, if it is an isolated case, in which rapid financing is required due to an unforeseen expense in a unique way, online credits can be a better option, since the interested party is able to request the amount that he strictly needs, Interest is lower and requires less paperwork.
In case your situation is temporary and you need financing for an isolated case, we recommend that you opt for a loan that allows you to access the amount of money you need, quickly and with lower interests than those of the credit line.
If you finally opt for a microcredit or loan, you can use our updated list to compare the best loans in the market.
Differences between a line of credit and a loan
On many occasions, clients often confuse credit lines with the granting of a loan, even though they are completely different financing products.
In fact, the differences between the two are wide, each being devised with a different objective.
One of the main differences between a loan and a line of credit is that, while a loan is the granting of a previously established amount of money, the lines of credit do not have a fixed amount, but that the applicant can use both money as you need as long as it is within a set maximum.
While a loan has been designed to meet a specific payment or to finance a project that has been previously planned, the objective of a credit line is to cover the daily expenses for which there is no liquidity at the time of paying the payment, it is That is, it is used at specific times when cash is needed.
The nature of a loan is that it is an already established amount of money, which is received in a single total payment, and is later repaid to installments agreed by means of a contract.
However, as we have said before, with a credit line the money is withdrawn as needed, without an established amount, and it is reimbursed at the end of the period of availability established in the contract.
That is why the credit lines have been designed to finance projects that require a large investment or short-term financing, while the loans are used to cover payments of large amounts of money, being repaid in the long term.
The interest rate is lower on a loan than on a line of credit, since on a line of credit the customer must pay the interest on the money used plus a commission for the available capital but that has not been used.
Finally, the credit lines expire in a short period of time, not more than one year, after which they can be renewed. However, a loan ends the repayment of the last installment of the payment.
Interest and commissions of a credit line
Credit lines have various types of interest and associated fees. Below we offer an overview of the main fees charged to the credit lines:
- Availability commission : as we have said before, financial institutions charge a commission for the amount of money they make available to the user in their line of credit, regardless of whether it is used.
- Opening commission: this commission is charged for simply opening the credit line on behalf of the applicant. It is qualified as a management commission.
- Commission for renewal : as for opening, entities charge a commission for the renewal of the credit line after the end of the established period of time.
- Study commissions: in the event that the entity conducts a solvency study of the applicant in order to determine its ability to cope with the reimbursement, the interested party must pay a commission to cover the expenses of said study.
- Commission for early cancellation: depending on the entity with which you request your credit line, you will have to pay a commission if you want to return the money before the deadline established by contract.
Advantages of credit lines
The advantages of credit lines are diverse. Some of them are the following:
- Flexibility and comfort
- Avoid defaults
Flexibility and comfort: With a line of credit, money is available at all times, being able to use it immediately. This way, you can use only the amount you really need. In addition, a line of credit acts as a simple checking account, so making use of it is convenient and very simple.
Speed: In addition to flexibility and comfort, credit lines also have the advantage of their speed: by having capital availability permanently, the client can use the money as if it were his own bank account.
Avoid defaults: This possibility of financing avoids problems arising from defaults and overdraft charges in your bank account, as it automatically charges payments to the balance of the credit line at the time when there is not enough money available in the account Bank
Disadvantages of credit lines
Despite having great advantages, credit lines also have certain drawbacks. Some of them are the following:
- Availability charge
- Higher commissions
- More bureaucracy and requirements
Charge for availability: On many occasions, the entities responsible for the credit lines charge for the available capital, that is, the interest payable is applied for the available money and not for the money that you have finally made use of.
Higher commissions: Precisely due to this immediate availability of capital, this financial solution has more commissions than other financing methods, which makes it a much more expensive solution.
More bureaucracy and requirements: Being granted mainly by traditional banking entities, the application of credit lines entails much more bureaucracy than other financial products. In addition, since these are high availability of financing, the requirements are greater, with the objective of reducing the risk of default assumed by banks.
What is the difference between a credit line and a credit card?
In specific moments of need for money, especially financing for consumption, there is also the possibility of obtaining financing through a credit card, a means of financing that has the same function as fast loans, but in a much cheaper way and without costs of maintenance.
In addition, there are free credit cards in Spain.
There are banks that offer credit cards without any cost, along with their payroll accounts, with which there is the possibility of delaying the purchases you make with them until the following month without any interest.
In this way, if your financing need is primarily for consumption, you can access money without interest at any time, and being assured that you can return it comfortably the following month.
A credit card has many advantages, depending on your need for financing:
- If the cards are free, you can request several and have them available in case of an immediate need for money.
- Most allow you to postpone purchases for a month (or more) without costs with all the comfort and security possible.
- You can also defer them for low interest for several months or even years.
- They have specific services such as the return of a percentage of the bonus purchases, points programs, extra benefits, discounts, etc.
- Additionally, most credit cards have free insurance included at no extra cost.
After reading this page you know that:
- A line of credit is used to cover expenses at a time when sufficient liquidity is not available.
- Credit lines are a good financing option for companies with irregular income.
- If your situation is isolated, a microcredit can be a better solution.
- Credit lines and loans are totally different financing solutions.
- There are various interest rates and commissions associated with a line of credit.
- With a credit card you can postpone your spending on purchases for a month without costs.