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What Are the Best Ways to Take Advantage of a Line of Credit?


Aug 31, 2018

One of the most useful financial tools that anyone can obtain is known as a line of credit. According to Investopedia, a line of credit is essentially an agreement involving a financial institution and a customer that sets a cap for how much money the latter can borrow via a loan.

The customer can then obtain money via the loan at any time, but the previously established cap must not be exceeded and any other requirements agreed upon by the financial institution and the customer must also be met. With access to a line of credit, people can suddenly enjoy more financial flexibility than they may have had before, but they must always remember to adhere to the conditions set in the agreement. The individuals who manage to gain a good grasp on how to wield the power of their line of credit can set themselves up comfortably moving forward, and listed below are some ways in which they can do so.

1. Address Emergencies

It bears repeating that a line of credit is accessible to anyone who has it at any time they want to use it. That characteristic of a line of credit makes it incredibly helpful in many situations – with emergencies coming to mind in particular. When someone in the family suddenly falls ill, the time they are taken to a doctor or a hospital should not depend on when the next paycheck will arrive. This is where the line of credit comes in, as people can draw money from it, address the emergency right away and prevent the situation from getting any worse. Because the situation is addressed quickly, the ill relative or family friend can get better faster, and expenses don’t become exorbitant. This can also apply for scenarios where something is damaged and insurance may be slow to pay out reparations.

2. Smooth Out Payments

Living paycheck to paycheck is not a comfortable approach to living, but it’s a reality that many people have to follow. When the paycheck arrives on the 15th, the cupboards can be restocked, bills can be paid, and maybe even some nights out can be had. On those other days when no paychecks arrive though, things can get tight and some people may need to be creative just to get by. Having a line of credit does not give anyone license to suddenly live beyond their means, but it does bestow upon people a sense of security because they know they have something to fall back on if necessary.

3. Home Repairs

Household repairs can be costly, which is why most people have to save up first before they finally get the plumbing fixed or get that repainting job done. With a line of credit, these issues that have been allowed to linger for far longer than they should can be addressed at last. Those long-needed repairs can be made and homeowners won’t have to worry about a passing storm doing significant damage to their place of residence. Even the car in the garage may be brought in for badly needed repairs with a little help from a line of credit. The benefit to home repairs is they will typically also increase the value of the home, which can result in higher home equity as well.

4. Treat Yourself

The endless cycle of getting up, going to work, coming home, and doing those same things all over again the next day can really take the life out of people, even those who like their jobs. Every now and then, it’s just nice to go out for a night on the town for a nice meal, or to purchase something that can be qualified as a luxury item. A surprise vacation can bring a welcome alternative to the daily grind as well. By drawing from a line of credit, it becomes possible for people to splurge on something every once in a while because they know their finances will still remain in order even after doing that.

5. Family Occasions

Holidays and birthdays are occasions for celebrations, but for many people, the reality of their finances prevent them from really going all out. Obviously, it’s not a good idea to spend too much on a birthday party or a present, but even doing just a little bit extra is guaranteed to put a smile on someone’s face. That’s why a line of credit can be someone’s best friend ahead of a birthday or the holiday season, as it allows them to temporarily ignore the limitations imposed upon them by their paycheck and celebrate the special occasions in style. These special days don’t come around often, so why not make them as memorable as they can possibly be.

6. Time Sensitive Spending

Few things are as frustrating as learning about a sale nearby that features some high-quality goods, and then remembering that the only money remaining for the month is already earmarked for groceries. Sure, many of the larger sales tend to be scheduled around paydays, but for many people, dealing with huge crowds, long lines, and hours of stress is just something they would rather avoid as much as possible. That’s why when a surprise sale comes along, individuals in possession of a line of credit will be best served to drop by, see what the fuss is all about, and then check if there are items on sale that would make for good additions to the home.

7. Pursue a passion project

A full-time job may pay enough to cover the monthly expenses, but for many people, those regular paychecks aren’t large enough for anything else. This is where the line of credit comes, as it provides people with a way to support something they have always wanted to do, whether that is an artistic endeavor, a business, or something else. The truth is that pursuing a passion project can come with plenty of risk, but because of the presence of the line of credit, that risk is significantly minimized. The pursuit of a passion project may not work out and that’s fine due to there being some easily accessible money, but if the project does succeed, then maybe that line of credit won’t be needed any longer.