How Does a Line of Credit Work?

How Does a Line of Credit Work?

A line of credit provides flexible access to funds up to a specified limit, making it useful for managing short-term cash flow needs, unexpected expenses, or variable spending. In this article we will explain how a line of credit works in four easy steps, including specific details about the Elastic line of credit, and what makes it unique.

1. Application Process

• Eligibility: Lenders have varying eligibility requirements, some mandated by law and others used to assess creditworthiness. To qualify for Elastic, applicants must satisfy the following criteria:
  • Age: Be at least 18 years old.
  • Military Lending Act: Must not be a Covered Borrower as defined by the Military Lending Act at the time of application.
  • Residency: Reside in a state where Elastic is currently offered.
  • Income: Possess a regular source of income, such as employment or benefits.
  • Bank Account: Maintain an active checking account.
  • Identity Verification: Provide the necessary information to verify identity.
  • Electronic Disclosures: Furnish a valid email address and consent to receiving electronic disclosures.
  • Credit Underwriting: Meet our established credit underwriting standards.
  • Terms and Conditions: Agree to the Terms and Conditions governing the use of Elastic.
• Documentation: Applicants typically need to provide proof of income (pay stubs, bank statements), personal identification (driver's license, state issued ID, passport, or other form of accepted identification), and banking information.
• Approval and Credit Limit: During the approval process lenders will check your credit history, which involves a credit pull which may have a small impact on your credit score. If approved, you’ll receive a credit limit based on your qualifications and the lender’s policies. Elastic’s credit limits range from $500 to $4,500.*

2. Borrowing Funds

• Accessing Your Funds: If approved, you have the flexibility to borrow and repay funds within your credit limit. With Elastic, you can request cash advances up to your credit limit, at any time. The amount you receive will be less the Cash Advance Fee, which is 10% of the requested amount.¹
• Revolving Credit: Lines of credit are revolving, similar to credit cards. You can borrow money up to your limit, repay it over time, and then borrow again without a new application, as long as you stay within your credit limit.

3. Payments and Costs

• Payments: Lenders require minimum payments by a due date specified in your billing cycle. With Elastic, you must make at least the Required Payment by your Payment Due Date. Your Required Payment Due includes repaying part of your Balance, any Carried Balance Fees and any Past Due Amounts
  
  Elastic understands you may need more than one Billing Cycle to pay off your Balance. If you pay your Balance over time, you must pay a part of it each Billing Cycle. Additionally, for each Billing Cycle that you have a Carried Balance of over $10, you will be charged a Carried Balance Fee ranging from $5 - $350. Please review the Terms and Conditions for details on the Carried Balance Fee.
• Repayment Options: Elastic offers various payment methods, including AutoPay, one-time electronic payments, debit card payments, and payments by check or money order. You can also make additional payments to reduce your balance faster without incurring prepayment penalties.
• Interest and Fees: The costs associated with a typical line of credit can be divided into two main categories: interest rates and fees. Interest rates are often expressed as an annual percentage rate (APR) and represent the yearly cost of borrowing money.
  
  An Elastic Account does not have an interest rate like other traditional credit products. Rather, you pay a Cash Advance Fee of 10% for every Cash Advance you request.¹ This fee is deducted from the cash advance amount you request.
  
  You are required to pay a portion of your balance each billing cycle, and if you carry a balance over $10 from one billing cycle to the next, a Carried Balance Fee ranging from $5 to $350 will apply. The exact amount depends on the carried balance and your billing cycle. Please review the Terms and Conditions for details on the Cash Advance Fee and Carried Balance Fee.¹
  
  Other lines of credit often include added fees for late payments or annual charges. However, with Elastic, you only need to be aware of the Cash Advance Fee and Carried Balance Fee. To minimize fees, borrow only the amount that you need and pay it back as soon as you can. Elastic encourages you to pay more than the Required Payment to reduce the overall cost of borrowing.

4. Monitoring and Management

• Account Statements: Lenders provide statements to help you track your borrowing and repayments. Elastic makes account management easy with a user-friendly online platform. Here, you can access your electronic statements, review your balance and transactions, make payments, and update your contact information. Keeping your contact details current is essential to continue to receive account notifications.

Why Choose an Elastic Line of Credit

Now that you understand how a line of credit works, you may be ready to explore your options. Elastic's line of credit offers a convenient and flexible way to manage your finances, allowing you to borrow only what you need you need and repay over time. It's a practical solution life's unexpected twists and turns, providing the peace of mind that comes with knowing you're prepared for whatever comes your way. Apply today and discover how Elastic allows you to access the money you need, when you need it.