A line of credit offers several advantages over a traditional credit card. They are both forms of debt financing that, like other forms of debt financing, involve the use of debt. While they share other similarities, however, lines of credit and credit cards aren’t the same. If you’re looking for a financing solution for your business, you may want to choose a line of credit over a credit card for the five following reasons.
5 Reasons to Choose a Line of Credit Over a Credit Card
You can expect a lower interest rate with a line of credit. As forms of debt financing, both lines of credit and credit cards have an interest rate. The Annual Percentage Rate (APR) represents the percentage of the yearly interest cost of debt financing. One of the key advantages of choosing a line of credit is the low interest rate. Lines of credit almost always have a lower interest rate than credit cards.
#2) Higer Limit
In addition to a lower interest rate, lines of credit typically have a higher limit than credit cards. Consumers may or may not benefit from a higher limit. Business owners, though, can absolutely benefit from it. A higher limit will allow you to use the line of credit to grow and expand your business.
A line of credit is one of the most flexible forms of financing available for businesses. It gives you the freedom to borrow only when you need and when you need it. Credit cards are flexible as well, but many business owners prefer lines of credit. As you borrow money from a line of credit, you can pay it down. You’ll only have to pay interest on the borrowed amount, and you can borrow up to the limit, which is typically higher than that of a credit card.
#4) Easy Application Process
Applying for a line of credit is easy. You can apply online without ever visiting a local banking branch or financial institution. Some credit cards have a simple application process as well, but they can prove difficult to obtain — especially for new businesses without a proven track record. You can easily get approved for a line of credit by opting for a secured line of credit.
#5) Debt Consolidation
Thanks to their low interest rates, lines of credit are ideal for debt consolidation. If you want to consolidate some of your business’s debt, you should choose a line of credit. You can use the line of credit to pay off loans and other forms of debt.
This article was brought to you by Intrepid Private Capital Group, a Global Financial Services Company. For more information on startup and business funding, or to complete a funding application, please visit our website.