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What are the benefits and drawbacks of secured lines of credit?

Let’s first discuss the benefits of secured lines of credit.


  • They come with a low-interest rate as the risk factor is almost nil.
  • They have a high credit limit so you have greater access to money
  • It’s comparatively easy to qualify for secured lines of credit

Now, let’s look at the drawbacks of secured lines of credit.


  • You could lose your collateral in the event of loan default
  • Your credit score will drop when you fail to repay the loan

Who offers unsecured lines of credit?

Different banks and financial institutions offer unsecured lines of credit to consumers. You just need to check their official websites to know the rate of interest, the application process, eligibility criteria, etc.

What credit score should you have for a line of credit?

You should have a good credit history to qualify for an unsecured credit line. You will never be granted an unsecured credit line if your credit score is poor because the lender is taking a greater risk if you default. There is no collateral against the loan. This means if you default, the lender can’t foreclose your home or car for repayments.

Usually, a 680 plus credit score can help you qualify for unsecured lines of credit.

What if you can’t pay off unsecured lines of credit?

Unsecured lines of credit are not free money. If you can’t pay off unsecured lines of credit, then lenders can charge late fees, fines, and penalties. They can report late payments and missed payments to your credit report, which will pull down your FICO score. They can also assign your delinquent accounts to debt collection agencies who can file a lawsuit against you.

How to get debt relief for unsecured lines of credit

There are various ways to get debt relief for unsecured lines of credit. Some of them are discussed below.

  • You can create a budget to save money and pay off your accounts.
  • You can settle your delinquent accounts to lower your outstanding balance.
  • You can consolidate your past due accounts to lower your interest rates.

Click here to understand the debt relief process in detail

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