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    What Is A PLOC And How To Get One?

    A majority of Americans don’t have enough savings to cover unforeseen circumstances. From lavish spending habits to multiple debts, the reasons for not having cash in hand may vary. Irrespective of the situation or reason, having a personal line of credit, or PLOC, is a viable option to ensure urgent financial needs are manageable.

    The best personal line of credit can help you properly maintain your finances and empower you when facing emergencies. In fact, you can use it at your own discretion to even manage your personal expenses. There are many benefits of having a PLOC, but the manner in which you use it determines how effectively it works. 

    Personal Line Of Credit

    A PLOC is an unsecured revolving credit account that offers a variable interest rate. It is generally a form of unsecured credit whereby you are pre-approved for a borrowing limit. 

    Obtaining a PLOC doesn’t require collateral, but it does demand a stellar credit history, a stable source of income, and a FICO score of 700 and above. You can use the pre-approved amount at your discretion, be it for paying bills, debt consolidation, home remodelling, paying for a vacation, or even your child’s education. 

    The notable advantage of a PLOC over other loans is that it can be used whenever and for whatever purpose necessary. Moreover, you’ll only pay interest on the amount you use.

    How Does A PLOC Work?

    A PLOC works in the same way as a credit card, minus the complications. You apply for a personal line of credit and the amount is reflected in your account. You can use it for any purpose per your needs. In fact, compared to a home equity line of credit or a credit card, this type of credit is more cost-effective and easy to maintain.

    Once approved, you gain access to the funds in the form of a revolving line of credit. You can access the funds either by visiting the bank or via a transfer using a designated mobile app in certain cases. You have full authority to keep drawing and repaying the amount over the duration as long as you don’t exceed the approved limit.

    Secured Vs Unsecured

    When it comes to using a PLOC as your credit method of choice, you may notice one major difference between the available options, namely whether the line of credit is secured or unsecured. 

    • Secured PLOC - When discussing a secured PLOC, the process involves pledging an asset as collateral. This might include your house, other property, a vehicle, or another large asset. In the event you cannot repay your borrowings, the lender is entitled to seize your collateral and sell it to cover the loan losses. Secured lines of credit generally don’t require as high a credit score to qualify compared to unsecured PLOCs.
    • Unsecured PLOC - This is an unsecured version of the PLOC that requires no collateral. This form of revolving credit is guaranteed by your promise to repay and creditworthiness. Thus, a higher credit score is absolutely necessary for approval.  

    The Difference Between A PLOC And A Personal Loan

    When exploring the key differences between the two forms of credit, the easiest way to describe it is that the PLOC offers a continuous stream of borrowing whereas unsecured personal loans deliver a lump sum. A personal loan is granted in the full amount upfront and repaid in regular monthly installments over the life of the loan. On the other hand, you can access your PLOC account as needed and borrow up to the approved credit limit. 

    With respect to interest rates, there are bigger differences. With a PLOC, interest is applied on the amount you draw from the approved limit. For personal loans, the interest is applied to the entire loan amount. 

    Read more about:

    Secured Personal Loans vs Unsecured Personal Loans

    How To Apply?

    The application process for a personal line of credit is quite similar to any other personal loan application. Still, there are some extra steps involved with this particular type of application.

    • Before comparing personal line of credit rates from different lenders, the entire process starts with a lender checking your credit history. You will have to share pertinent personal financial details including items like your income, savings, and other debts outstanding. 
    • Furthermore, lenders will check to see if you encountered financial issues in the past and how your credit reflects those habits. On the basis of your credit history, the lenders can judge if you are a reliable borrower. 
    • Your credit score will be checked to validate if you are eligible for a PLOC.

    Pros Vs Cons

    Before you go ahead and apply for a personal LOC,  you should evaluate the pros and cons of this type of credit carefully. 

    Pros:

    • A personal line of credit a cost-effective alternative to personal loans, credit cards, and HELOC.
    • You can access your amount without much hassle and as needed. 
    • There are different ways you can access funds, including in-person at the bank, from a mobile app, or via an electronic transfer. 
    • You can access variable rates and flexible repayment terms that suit your financial needs.

    Cons:

    • The interest you pay won’t be tax deductible.
    • The interest rates might be higher than a HELOC.
    • It is difficult to qualify if you don’t have a stellar credit history and score.

    Bottom Line

    If you need access to credit for daily needs, a PLOC may be easier to handle compared to credit cards without the sky high interest rates. There are many benefits to this form of revolving credit, and you can use it for various personal purposes. However, the requirements are more stringent and approval ultimately depends on your creditworthiness.