What Is A Personal Line of Credit (PLOC)?

Do you wish you had just a little bit more money to fund your projects, vacations, or help with bills for one month? A personal line of credit (PLOC) allows you to borrow money from a lender without collateral. Within an allotted timeframe, you can borrow money from this line to make purchases as needed.

How Does It Work?

Once you apply, your financial institution will give you the total amount of credit you can use, known as your credit limit. During your PLOC’s draw period, or the fixed window of time the credit is available, you can use the funds to make purchases.

PLOCs are considered as a revolving form of debt. You only need to pay back what you use, unlike a mortgage or auto loan. Every month, you will be sent a statement with a due date for only the amount you borrowed since you opened the line. If you don’t pay back the full amount by the due date, you will have an outstanding balance and be charged interest, similar to how credit cards work.

Pros

  • Much like credit cards, you only need to pay back what you borrow
  • Lower interest rates - sometimes even lower than credit cards!
  • No collateral is required; you don’t have to put up your house or vehicle to secure the loan
  • If bills are too much for you one month, you can use your PLOC to stay current with your vendors

Cons

  • Hard to qualify for borrowers who have a low credit score or poor credit history
  • With thousands of dollars preapproved and ready to be spent, it can be easy to over-borrow and withdraw more than you need/can pay back
  • Interest rates are not set in stone – they can increase at any time while you have the PLOC with little to no warning
  • Potential fees – Some financial institutions will tack on maintenance fees to keep the PLOC open

How To Apply

Are you interested in applying for a PLOC? First, research the best lender for your needs. Most banks and credit unions will have their services and offerings listed online for you to compare and contrast. When you go to apply, most financial institutions will require the following:

  • Filled out application – this is when they will ask for your current financial details and run a hard credit inquiry (keep in mind, this can ding your credit score temporarily by a few points)
  • Verifying documentation, i.e. W-2s, pay stubs, proof of address, etc.

Then, you just sit back and wait for approval. Once you are approved, you can start withdrawing funds. If you don’t think this borrowing method is right for you and your needs, reach out to your local financial institution. They will have other offerings, such as HELOCs, credit cards, personal loans, and more to find the best fit for you and your future goals.