Online Line of Credit: Definition, Uses, and Benefits

An online Line of Credit could provide quick access to funds for various needs. Whether you need to cover daily expenses, medical bills, or home improvement costs, you can borrow as much or as little as you need up to your approved borrowing limit. 

Traditionally, opening a personal Line of Credit required filling out an application at your local bank or credit union — but today, you can apply for a Line of Credit online and receive your funds via direct deposit. 

What is an online Line of Credit? 

A personal Line of Credit is a flexible financing option that works kind of like a credit card, although there are key differences. 

If approved for an online Line of Credit, your lender determines your credit limit or maximum borrowing amount. Lenders have different approval requirements, but your borrowing limit will likely depend on factors like your credit history, employment status, and ability to repay. 

Upon approval, you can tap into your Line of Credit as needed — but only up to your limit. Once you borrow funds, you’ll repay the amount all at once or over time, along with any interest or fees as outlined in your loan agreement. Plus, you’ll only pay interest on the amount you borrow, and your credit line stays open as long as it’s in good standing. 

Secured vs. unsecured Lines of Credit 

Lines of Credit can be either secured or unsecured. With an unsecured Line of Credit, your credit limit is based on your ability to repay, which is typically determined by checking your credit score and proof of income. The better your credit score, the more likely you could qualify for a larger credit line. 

On the other hand, if you have poor or no credit, any approved amount will be smaller — and you’ll probably have higher interest rates. 

If you don’t qualify for an unsecured credit line, you might consider a secured Line of Credit. Lenders that provide secured credit lines require collateral, usually in the form of a cash deposit. The amount you can borrow is based on the value of your collateral. Secured Lines of Credit could be easier to get because there’s less risk to the lender. 

How to use an online Line of Credit 

An online Line of Credit could be used to pay for just about anything. For instance, you could open a Line of Credit to have a source of available funds for emergencies. If you’re ever faced with a costly car repair or medical bill, there’s no need to go through the loan application process — you simply withdraw the amount you need from your available credit line. 

A Line of Credit could also be a good option for recurring expenses that require ongoing access to funds, such as a home improvement project. With these types of projects, you don’t necessarily know what the end cost will be, but an open Line of Credit gives you the flexibility to withdraw money as needed. 

Benefits of getting a Line of Credit online 

Easy online application 

You can apply for a Line of Credit online within minutes. This is great news if you don’t have the time or desire to fill out a lengthy, in-person application. It’s also perfect if you live in a rural area and don’t have a loan office near you. 

Quick funding 

The approval and funding process for online Lines of Credit is also very fast. Depending on the lender, you may even have access to your Lines of Credit funds the same day you apply or within 24 hours. 

Flexibility 

Since online Lines of Credit allow you to withdraw funds at any time, they’re more flexible than other loans. This could be particularly useful if you’re unsure of exactly how much money you need upfront or how long you’ll need access to funds. 

Could be used for any expense 

There’s no restriction on how you can use your online Line of Credit. While it’s better suited for certain situations, once the money hits your account, it’s yours to use however you please. 

Good credit is not needed for approval 

Depending on the lender, you could still get approved for an online Line of Credit if you have poor or fair credit. Direct lenders like Advance America consider factors in addition to your credit score, such as: 

• Your income 
• Employment status 
• Debt-to-income ratio

➢RELATED: Line of Credit vs. Loan

How to apply for a Line of Credit online 

1. Compare lenders and Line of Credit options 

The first step of applying for any loan is to compare your options. 

Start by researching Line of Credit lenders in your area and checking their online reviews. Next, compare their interest rates, terms, and fees to determine which Line of Credit is right for you. 

2. Gather all necessary documents 

Once you choose a lender and online Line of Credit, collect the documents you’ll need to apply. These will likely include a government-issued ID like a driver’s license or passport and pay stubs, W2 tax forms, bank statements, and other proof of income. 

3. Fill out an application 

Visit the lender’s website to fill out the application online. Be prepared to provide personal details like your name and email, along with financial information such as your income and monthly debt obligations. 

4. Submit your application 

After you fill out and submit your application, you’ll need to wait for the lender to review it and make a decision. Fortunately, many lenders offer instant approval decisions and will get back to you within a few minutes. 

5. Withdraw funds 

If approved, the lender will give you access to your Line of Credit so that you can withdraw funds whenever you’d like. In many cases, you’ll select the amount of your first draw when submitting your application or shortly after you’re approved. 

Get an Advance America online Line of Credit today 

We offer online Lines of Credit in several states. With our instant approval decisions and quick funding, you may still get approved for the money you need regardless of your credit history. 

Sound good? Start your application now. 

Online Line of Credit FAQs 

Can I get a Line of Credit online if I have bad credit? 

Traditional lenders like banks and credit unions are less likely to approve your application if you have a poor credit score. If you’re hoping to open a Line of Credit with bad credit, you could improve your chances of approval by going through a direct lender like Advance America. 

Can I use an online Line of Credit for my business?

Yes, a Line of Credit could be a good option for self-employed individuals or small business owners who need to cover certain business expenses. Keep in mind, however, that interest payments may be tax-deductible, so you may want to apply for a business Line of Credit or SBA loan instead of a personal credit line. 

Are funds instant if I apply for a Line of Credit online? 

Line of Credit loans offer quick approvals and financing times. Approvals are often done in a matter of minutes, and whether you receive your funds the same day depends on when you’re approved and request the withdrawal. 

Can I have a Line of Credit but not use it? 

One of the biggest advantages of Lines of Credit is its flexibility. You may be required to withdraw a minimum amount when you open the account, but how often you tap into the credit line after that is up to you. 

If you’d like, you can leave your Line of Credit sitting unused for years. You won’t be penalized for not withdrawing funds, and you won’t pay interest on pre-approved funds you never borrow. 

Is an online Line of Credit right for me? 

A Line of Credit could be a good loan option to help you meet your financial needs. However, it’s not the only type of loan you can apply for online. If you’re not sold on a Line of Credit, here are a few other loan options you might consider: 

Payday Loans. Payday Loans are a good option when you need a small amount of money to tide you over until your next payday. Payday Loans typically max out at around $500 to $1,000, and they’re often used to pay for utility bills, car repairs, home repairs, and similar one-time expenses. 

Installment Loans. If you need more money than what’s available with a Payday Loan, consider an Installment Loan. Installment Loans offer up to $3,000, depending on your state and lender, and are available as a same-day option. As with Lines of Credit and Payday Loans, you can apply for an Installment Loan online or in person. 

Title loans. A title loan is a type of secured loan where you use your car title as collateral. Here’s how it works: 

1. You apply for a title loan from a direct or traditional lender. 
2. A representative inspects your vehicle to its value. 
3. The lender offers you a loan based on the value of your car — usually around 20%-50% of the value. 

If you accept the terms of the loan, the lender issues a loan in exchange for your vehicle title. You can continue using your car in the meantime, but if you can’t repay the loan, the lender will keep your car. 

Pawn shop loans. Pawn shop loans are set up similar to title loans in that they’re secured loans. Rather than using your car title as collateral, however, you can use anything of value. That includes collectibles, jewelry, baseball cards, tools, and more. As with title loans, if you can’t repay the loan, the pawn shop owner will keep your collateral as payment. 

Credit cards. Credit cards are similar to Lines of Credit in that they offer ongoing access to funds up to a set limit. As long as you make payments and keep your account in good standing, you will have access to your credit until you decide to close your account or cancel your card. 

Home equity line of credit (HELOC). Another type of credit line you could open is a home equity line of credit. Commonly known as a HELOC, this type of credit line is based on the equity in your home. Home equity refers to how much your home is worth versus how much you still owe on it. 

HELOCs often offer more money than other types of personal loans, including personal Lines of Credit. Your credit line can be anywhere from $10,000 to hundreds of thousands of dollars, depending on your home’s value. This makes it a good option for homeowners requiring big-dollar purchases or renovations.