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Credit line
A line of credit is a financial product that self-employed workers and entrepreneurs in Spain use frequently in order to continue with their business model.
For example, if you have your own company, it is common for customers to take some time to pay their bills. But if you do not have cash in the box, how are you going to face the payment of your employees' payroll? Very simple: with a line of credit.
This financial product, which is also known as a credit account, is a fixed amount that a financial institution (physical or online) makes available to the applicant so that he can use it in whole or in part in a specific period of time (normally one year). . The line of credit company charges interest on the money borrowed, but usually only on the amount that is used.
That is, if, for example, you are approved for a credit line of up to 5,000 euros but you only make use of half of that money, you will only have to pay the agreed interest for 2,500 euros. Remember that before accepting this financial product you must pay attention to its APR, repayment term and installment.
Keep in mind that while you have the credit line, the agreed commissions will be charged according to the balance you have used during the time you have used it.
Although both are financial products that can be obtained online and offer fast money to applicants, they do not work the same. In a personal online loan, the applicant receives a specific amount of money in a single occasion that must be paid in a specific period of time according to the monthly installments and interest rates established in the signed contract. The repayment term can be extended but is subject to the commissions determined by each online loan company.
As we previously indicated, in the case of credit lines, an amount of money is offered available to the user that he can use in full or not according to his specific needs and the interests and terms agreed. Therefore, they are similar but different financial products.
The process of applying for a line of credit online is fast, simple and practically without paperwork since everything can be done easily from a computer, mobile phone or tablet.
First of all you must check what is the amount you can request according to the selected company. You will then have to fill out an application with your personal data to start the evaluation process. Then you will have to verify your identity and justify your financial profile with the documents that are required, such as your ID and a bank statement with the latest movements of expenses and income. Once it is evident that you can afford the payment of your credit line, you will be able to have it instantly.
In the first place, in a personal loan all the money is received in its entirety, while in the line of credit only the money that is needed is used even if there is a greater amount available. In addition, lines of credit are usually automatically renewed once the contracted debt is paid, while in a personal loan you have to start a new process.
Currently there are different companies that meet the requirements of the Bank of Spain to offer this financial product online. Their advantage is that you can always see their status from the Client Area, so in addition to being secure, they are also very convenient. Of course, remember to compare the companies well to choose the one that has the least interest or does not charge you an opening commission, study management or early cancellation.
The best line of credit companies in Spain offer this possibility. This means that if you return the borrowed money before the agreed date, you will not have to pay cancellation interest and you will be able to immediately have your credit line available again.
Financial entities evaluate each case personally, so there is no fixed amount; in fact it can vary between 1,000 and 60,000 euros. The final amount that you will be awarded will depend on your financial risk profile (for example, if you are in a delinquent file such as Asnef) and your usual income and expenses.
It all depends on the situation of each individual, but you must bear in mind that generally in a line of credit the interest is paid on the money that is actually used, while in a personal loan the interest is paid on all the money received. Although these conditions may change according to the policy of each line of credit company.
Usually only that you are of legal age and that you have monthly income.
Jerome P Allison ( LinkedIn )