Now that it’s 2020, why wouldn’t you go online to borrow money? It’s a fast, convenient, and simple process. As long as you have the Internet, you can apply anywhere and anytime that works for you.
But borrowing money is still a big decision. Whether you choose a digital line of credit or a more old-fashioned option, it’s up to you to make sure that you don’t choose the wrong option for your needs.
So if you get a fast line of credit online where the request submission process is quick, don’t fall for these traps below. Avoiding them may help you pay back what you borrow.
1. Not Checking Your Score
Skipping this step before borrowing money online could be a mistake. It may mean you’re going into the whole thing blind, unaware of whether the contents of your file are accurate.
If there is a mistake that’s affecting your score, you may not qualify for the rates you want. Or, you might get rejected outright.
Some financial institutions may not check your score before they grant you funds. But without this check, they may not have a good idea of your creditworthiness and apply higher interest rates as a result.
Each of the major reporting agencies must generate one every year free of charge so getting a free report is easy.
2. Not Reading Your Terms Carefully
Your terms are so important when it comes to your line of credit. They’re essentially the rulebook for using your LoC, outlining the nitty-gritty details about how and when you’ll pay it back, as well as what happens if you don’t.
Things like your interest rates, finance charges, and potential late penalties can be found in your terms. You’ll also find your billing statement schedule here.
By skimming this document, you may not fully understand how these details impact what you pay. Or, in the worst-case scenario, you may not realize there are hidden fees nestled in your loan agreement.
A seemingly affordable online line of credit may end up being expensive if you don’t factor in these fees. Make sure you read things thoroughly to catch potential hidden fees, so you don’t get overcharged.
3. Not Reviewing Your Budget
It’s easy to overlook what these fees will cost if you don’t refer to your budget. They may look good on paper, but they may not fit in the reality of your finances.
Your budget is the blueprint for your cash comings and goings. By plugging in your LoC’s payments, you’ll be able to see if it’s something you can actually afford while juggling all your responsibilities.
If you would have trouble paying other bills to cover your LoC repayments, it may not be the right option for you. Look at your non-essential spending to see what you can cut out to free up cash.
Going online to get your line of credit may be a convenient perk of living in the 21st century, but it’s not without its drawbacks. Like any LoC you get in-person, review your options carefully to get the best deal possible. Remember to avoid these traps, and you’ll already be in a better spot!