It is impossible to plan for difficult situations, so it is good to have a bank account with funds for sudden and urgent spending. But reality dictates its conditions, and most people lack the money to build a financial reserve cushion out of their income alone. If this applies to you too, a credit line – a type of consumer credit that can be easily tailored to your individual needs – may be helpful to you. In our new blog article we talk about the benefits of a credit line for emergencies – read on and find out more!
What does “emergency” really mean?
There is no shortage of extra money in life, but can they all be called emergency? To avoid spending all your savings in a couple of days and putting a huge debt burden on your shoulders, evaluate your situation according to the following criteria:
- are additional funds needed immediately or can you wait peacefully until payday?
- will there be any negative consequences without the additional money, such as the increase in the amount required due to the fine?
- Is money needed for vital purposes, not for entertainment and ill-considered spending?
An extraordinary financial moment may be the need to pay a sudden bill or to purchase an unexpected but important item such as medication. Some items that are usually included in entertainment spending may make certain situations vital – such as the airline tickets needed to get to a sick relative as quickly as possible.
2 ways to spare money
Financial wise experts and credit specialists agree that it is best to deal with emergency situations with your own savings, as every loan means even more spending due to overpayment. In order to gradually build up your personal financial security cushion, you need to make savings every month, and the higher your income, the more money you have to put in reserve.
If your income level is high enough, you can invest a portion of your savings in investing to earn more over time. But do not forget about investment security techniques and invest as much as you can afford to lose. In order to maintain sufficient savings, all free cash needs to be divided into two baskets – one is the money remaining in the bank account as a reserve for off-white days and the other is the source of investment.
If income is relatively low, savings need to be twice as important. Even if you manage to save just a few hundred euros over several months, the result is worth it – if you need a credit line, you can apply for a lower credit limit and reduce your overall expenses. And now let’s talk about exactly how a credit line can be useful in difficult life circumstances.
Credit line – additional money in the long run
A credit line is a long-term loan that can serve as a financial cushion. Unlike regular credit, a credit line can be used as needed and the borrower has the right to withdraw from his credit account different amounts under a single credit agreement. The best deals on a credit line include free account servicing, and many lenders offer a 100% interest discount over a 30 day period. Under these conditions, a credit line can be particularly useful if you need money in the long term and the exact amount of the loan is not known.
An alternative to a credit line is a consumer loan with a long repayment term, which allows you to make very small monthly payments. This service is offered, among other things, by non-bank lender Lab Credits, which grants consumer loans for up to 72 months. Of course, the longer the loan repayment period, the higher the interest payment, but Latvian legislation stipulates that the borrower has the right to repay the loan in full before maturity without paying any penalty or additional commission.
Non-standard credit line : rare but available
In many cases, people have to look for a lender with special credit lines. The most common types of non-standard credit line are:
- credit line from 18 years. At this age, the majority of the Latvian population is still in secondary school and not in full-time paid employment. Lenders are reluctant to work with young borrowers who are not yet fully on their feet and can borrow without assessing credit risks. But there are other situations – if a young person of 18, 19 or 20 is working and fully self-supporting, the credit line may be available to him or her. If this is your case, look for a creditor who clearly states that they are assessing loan applications from young people;
- credit line with bad credit history. Negative credit history is due to past debts. In Latvia, the borrower’s name is included in the debt history databases if the payment delay exceeds 60 days. Only in this situation can we talk about a negative credit history. Many lenders give loans to people with a positive credit history, but a credit line with a bad credit history is also not impossible. The only condition is the absence of active debts.
It is worth knowing that specific credit lines may be available on less flexible terms. The lender may offer a lower credit limit and a higher interest rate, so don’t hurry to accept the first offer – be sure to contact different lenders and compare the terms of the loan. We, Ricky Venebelo, a credit comparison platform that can help you choose the best credit line deals for you.
The credit line is not just the prerogative of wealthy people – there are many offers on the market that can also benefit people with a medium but stable income. Find more information on credit lines on our platform and find the best deal with Ricky Venebelo!