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Personal Line of Credit

April 9, 2021 by MoneyKey

Ideally, everyone would have a bunch of money set aside for a rainy day – an emergency fund that, as some experts advise, could be tapped into when your car suddenly breaks down or an unexpected medical expense pops up.

Unfortunately, that’s not the case for a lot of people. If you happen to be one of these people who would love to be prepared but may not have the money saved up right now, a personal line of credit can be useful to help relieve the pressure of unexpected expenses.

personal line of credit can act as a flexible safety net you can fall back on for access to funds when you’re facing an unexpected emergency. Let’s take a look at some of the important details surrounding this type of personal loan.

What is a Personal Line of Credit?

For some people, there may be a bit of confusion between a line of credit loan and an installment loan because both types of loans are paid back over time. However, there are some key differences. While an installment loan is closed-end (i.e. it’s made available to the consumer as a one-time lump sum) with a set repayment schedule, a line of credit is open-ended (i.e. allows a consumer to draw additional funds at any time as long as they still have available credit and their account is in good standing) and doesn’t have a set repayment term.

person doing research on a personal line of credit on their computer

Unlike a payday loan or installment loan, a personal line of credit is similar to a credit card in that you get access to an approved amount of credit and generally don’t have to apply again each time you need access to credit. Once approved, you can borrow as much as you want up to your available credit because a line of credit is a ‘revolving credit’. This means that the borrower can draw the money, pay it back and draw it again, in a revolving cycle.

To be more specific, a revolving line of credit is a loan that allows you to draw up to a certain limit. This limit can fall within a wide range depending on factors such as your credit score, your income, whether or not you can offer up other things of value like a home or car to “secure” the loan, and what demands you already have on your money for things like car payments, mortgage payments and other loans.

You can generally check your balance or make additional payments towards your line of credit loan at any time. The legally permissible terms of a line of credit typically varies depending on the state in which the line of credit is offered. Be sure to check the state-specific fee and/or interest structure of the product offered by a financial institution as they may have multiple products if they operate in multiple states.

When Should you Consider Using a Personal Line of Credit?

With so many types of loans available, it may be difficult to decide what kind of personal loan makes sense for you. A personal line of credit may be helpful for anyone who runs into an unexpected emergency expense by giving them access to a small safety net of funds when the need arises.

There are a number of situations when you can use a line of credit as a safety net, like:

  • If you need to bring your car in for an unexpected repair the same week your fridge short circuits.
  • If you need to pay the fees for your child’s school and the same day you have to pay upfront for some unexpected dental work.
  • You need to take an unexpected trip to the emergency room.

The list goes on, but having a line of credit is like having a safety net of cash you can access when you find yourself in a short-term shortage and need to take care of an emergency.

person sitting on the floor ding research on a personal line of credit

One benefit of a revolving line of credit is that you’ll only be charged interest and/or fees on the amount of credit you use. This means that if you only need to borrow a portion of the total credit available to you, you’ll only be charged on that amount versus the total limit of your line of credit.

It’s important to remember to use your personal line of credit responsibly and only borrow the funds you require, as you’ll be charged interest and/or fees on any amount you withdraw. It should be thought of as a backup option to cover your needs, not extra money to buy the things you want.

Applying for a Line of Credit

There are some factors that come into play when applying for a line of credit. A lender may look into your credit history, which is meant to indicate how likely you are to pay back your debts. They may also look at your current income and a number of other factors. These factors can vary depending on the financial institution you’re working with. For example, to qualify for an online line of credit or personal loan with MoneyKey, you must:

  • Be of legal age to contract in your state
  • Be a US citizen or permanent resident
  • Be a resident in the state where our product is offered
  • Have an active bank account
  • Have a regular source of income
  • Have a valid contact number and an active email address

If you meet all of the above requirements, you may qualify for a personal loan with MoneyKey.

Like we mentioned, when you apply for a personal line of credit, a financial institution may also look at your credit history. They may evaluate how much money you make, how secure and sustainable your employment situation is, and how you’ve paid your past debts.

house keys in a door

It’s also important to understand the difference between a secured and unsecured line of credit. You may think that in order to get a line of credit, you’ll need to put up some form of collateral, like a house or a car. This is true in the case of a secured line of credit – as the collateral acts as a form of security for the financial institution issuing the loan. If you default on your loan, they’ll still come away with an asset that holds some value. But in many cases, personal lines of credit are unsecured loans.

With an unsecured personal line of credit, the borrower won’t need to provide any property or other collateral to qualify for the loan. Keep in mind that because a financial institution won’t have any assurances that you’ll pay back what you’ve borrowed, the rates for these types of loans tend to be higher than with secured loans.

It’s important to go over all the details of your loan so that you understand what line of credit rates and terms apply to you before agreeing to it.

Research your Line of Credit Options

There are a number of ways you can find yourself in a cash crunch. Without a substantial savings fund, these surprise expenses can be difficult to cover, forcing you to choose which one you need to pay for the most. Finding yourself in this difficult situation can cause a lot of stress and desperation. It is in these moments that having access to a personal line of credit is beneficial. It may help to alleviate the stress that temporary cash shortages can cause and it’s one way of getting access to extra funds in case there’s an emergency.

One of the main benefits of a line of credit is its flexibility. Borrowers can determine how much money they borrow at any given time based on their needs, and will only have to pay interest and/or fees on the amount borrowed, not on the entire approved credit limit. In addition, consumers can also decide to make their minimum payments instead of making their payments in full. This can give you some wiggle room as you don’t necessarily need to pay back what you’ve borrowed in full all at once.

If you’re approved for a line of credit, it can be a lifesaver in a time of need. Although they can be useful, it’s important to remember that any amount you draw will incur fees and/or interest so draws should be made primarily for short-term emergency expenses – you should never treat a line of credit as additional cash to be spent on wants.


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Not all applications are approved; duration of approval process may vary. Credit limits/loan amounts are subject to further verification criteria. If you are a returning customer, loan amounts may vary.

*If approved, any requested funds may typically be deposited into your bank account the same business day; timing of funding may vary by product and state. The date and time funds are made available to you by your bank are subject to your bank's policies. For specific funding cut-off times, click here.

**You may request a draw from your Line of Credit at any time, so long as you have available credit and your account is in good standing. In the State of South Carolina, you can withdraw the total credit available to you all at once, or in smaller amounts over time as you need it, with a required minimum draw of $610.

Applications submitted on this website may be originated by one of several lenders, including: CC Flow, a division of Capital Community Bank, a Utah Chartered bank, located in Provo, Utah, Member FDIC. CC Flow will be responsible for underwriting, approving and funding the CC Flow Line of Credit. The CC Flow Line of Credit is available through MoneyKey.

Product availability varies by state. To see loan products offered in your state of residence, please visit our Rates and Terms page.

MoneyKey – TX, Inc. is licensed as a Credit Access Business (CAB), License No. 16641-62815, by the Office of the Consumer Credit Commissioner and registered as a Credit Services Organization (CSO), Registration No. 20110150, by the State of Texas. All loans for which MoneyKey acts as a CSO/CAB are funded by an unaffiliated third-party lender and serviced by MoneyKey. In the State of California, MoneyKey – CA, Inc. is licensed by the Department of Business Oversight pursuant to California Deferred Deposit Transaction Law License No.1004516.

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