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A new consumer lending product will hit the market soon, and users may find it brings the best of a combined world: a credit card and a personal loan.
Earlier this month, online lender Upgrade introduced its Personal Credit Line product. The product is a line of credit that allows for borrowing up to $50,000, according to a press release. Borrowers can draw from it as needed through their own timeline and with a pre-selected repayment schedule. Credit lines will be structured via the internet, and in the future, borrowers will have physical cards and virtual tokenized cards that will allow them to draw on the credit line with a swipe or mobile payments, according to Upgrade.
“Our goal was to develop a product that is lower cost, more predictable and more responsible — a monthly payment of principal — than a credit card,” said Renaud Laplanche, co-founder and CEO of Upgrade.
Costs and Approvals
The product does not have monthly minimum payments with high fees or high variable rates like credit cards. Instead, it includes some features of personal loans. Consumers aren’t charged fees to open the credit line or to use it. A fixed interest rate is only paid on the borrowed amount while the credit line has a selected fixed timeline of 12 to 60 months. Consumers will pay a fixed portion of the loan principal each month.
Laplanche said of the product, “We designed the Personal Credit Line to give consumers the two things they want most: the flexibility to access funds when they need them, and the predictability of a fixed rate and equal monthly payments.”
Consumers can get approved in a few minutes, without needing collateral or an appraisal process. Borrowed funds will then be directly deposited into a consumer’s bank account.
How a Personal Credit Line Works
A borrower can be approved for a credit line up to $50,000. Initially Upgrade will do a soft credit pull to see what the borrower qualifies for, then does a hard credit pull once the loan is approved and the credit line is set up.
Then, as the borrower needs funds – say a few thousand dollars, or a portion of the credit line – he can draw on the credit line and select a payment plan and a loan term carrying a fixed interest rate for the loan’s duration (12 to 60 months). He’ll receive the money and start paying the loan in the following month – just on the funds that have been accessed.
The borrower can access money as needed from the approved line of credit and will set up a payment plan and loan terms for each borrowed amount. Each time a loan is drawn from the credit line, Upgrade will conduct a soft credit pull.
The consumer will have fixed-rate loans with potentially different timelines and different fixed interest rates. The rate applied to each cash loan will never change after the cash advance has been executed. So now it’s just time to keep on top of the monthly payments.
Personal Credit Line will be made broadly available to consumers soon; those interested in applying or receiving updates can join a waitlist on Upgrade’s website.
Author: Mike Brown
In his role at LendEDU, Mike uses data, usually from surveys and publicly-available resources, to identify emerging personal finance trends and tell unique stories. Mike’s work, featured in major outlets like The Wall Street Journal and The Washington Post, provides consumers with a personal finance measuring stick and can help them make informed finance decisions.