When Should I Get a Line of Credit? The Right Time to Apply

Timing plays an important role when considering a line of credit. Many Australians only look into credit options once they are already under financial pressure. At that stage, approvals can be more difficult, limits may be lower, and borrowing costs can be higher.

A line of credit is generally most useful when it is arranged in advance, as part of a considered financial approach rather than a last-minute decision. This guide explains when a line of credit may be suitable, signs you may be ready, situations where it can be better to wait, and practical steps to prepare before applying.

The aim is to help you better understand how a line of credit works so you can make more informed decisions and improve your financial literacy.

What is a line of credit? (Quick overview)

A line of credit is a revolving credit facility that allows you to access funds up to an approved limit.

Key features include flexible access to funds, the ability to borrow, repay, and borrow again within the limit, interest charged only on the amount used, and ongoing availability as long as you meet the agreed terms.

How a line of credit compares to other options:
It can be similar to a credit card in that it provides flexible access to funds, though interest rates and limits may differ. It can also be compared to a personal loan, as repayments are structured, but without receiving the full amount upfront.

A line of credit may be considered for ongoing or unpredictable expenses, projects where costs are uncertain, emergency backup funding, or smoothing short-term cash flow. Understanding these differences can help you decide whether it fits your situation.

Best times to get a line of credit

1. When your finances are stable

A common view is that a line of credit is easier to arrange when your financial position is stable rather than during financial difficulty. Lenders generally assess applications based on income stability, existing commitments, and credit history.

Factors often associated with financial stability include consistent income, manageable debt levels, a positive repayment history, and some savings already in place. Applying from a position of stability can provide more flexibility and reduce stress if unexpected costs arise later.

2. Before major life changes or planned projects

Applying before significant changes to your circumstances can sometimes make the process smoother. Examples include changing jobs, starting a business, reducing work hours, taking parental leave, moving house, or planning renovations or medical treatment.

Having access to credit in advance can provide options if costs change or take longer than expected, without needing to apply for finance mid-transition.

3. As a complement to an emergency fund

A line of credit can sometimes be used alongside an emergency fund, but it is generally not considered a replacement for savings. Savings can help reduce reliance on borrowed funds, while a line of credit may provide additional flexibility if needed.

Some people consider this approach if they are still building savings, have irregular income, or want an extra buffer. In these cases, it is usually important to prioritise savings first and use credit cautiously and with a clear plan to repay.

4. When reviewing high-interest credit card balances

In some situations, people explore a line of credit as part of a broader plan to manage higher-interest debt. This approach typically requires discipline, a clear repayment strategy, and changes to spending habits to avoid increasing overall debt.

Without careful planning, using multiple credit products can increase financial pressure, so understanding the risks is essential.

5. When interest rates and lending conditions are changing

Many lines of credit have variable interest rates, which can change over time. Lending criteria can also tighten during higher-rate environments. Some people choose to explore their options earlier so they understand what access may be available, even if they do not plan to use funds immediately.

This can help with planning, but it is still important to factor potential rate changes into your budget.

Signs you may be ready to consider a line of credit

Financial indicators can include stable income, manageable debt levels, the ability to meet repayments comfortably, and some emergency savings.

Behavioural indicators may include a consistent repayment history, controlled use of existing credit, tracking spending, and viewing credit as a financial tool rather than extra income.

Situational indicators can include having a clear purpose for the credit, understanding how it works, and having a repayment plan in place before applying.

When it may be better to wait

It may be worth delaying an application if your income is unstable, you are already struggling with debt, your credit history has recent issues, or you are relying on credit for everyday living expenses.

Taking time to improve your financial position, reduce debt, and build savings can lead to more options and better outcomes later.

How to prepare before applying

Preparing in advance can help you better understand your position and options. This may include reviewing your credit report, paying bills on time, reducing existing balances, maintaining stable employment, and building savings.

It can also help to organise documents such as payslips, bank statements, identification, and details of existing debts. Researching fees, understanding variable rates, choosing an appropriate limit, and stress-testing your budget for changes in interest rates can support more informed decisions.

Questions to ask yourself before applying

Consider why you want a line of credit now, whether your finances are stable, and whether you can manage repayments if circumstances change. Reflect on whether another option, such as saving more or using a different product, may better suit your needs. Understanding both the benefits and risks can help you decide if the timing is right.

Credit24 line of credit: applying when you’re ready

A Credit24 line of credit is designed to support responsible borrowing and informed decision-making.

It may suit people who want flexible access to funds, have a clear purpose, and can comfortably manage repayments. Credit24 offers credit limits between $500 and $10,000, responsible lending assessments, no application, monthly, or withdrawal fees, flexible repayment terms of up to 36 months, no early exit penalties, and access to funds via Osko for eligible banks.

Understanding whether a line of credit or a personal loan is more suitable for your circumstances can form part of a broader financial plan.

Apply now: https://www.credit24.com.au/au/apply/login

Frequently asked questions

When is the best time to apply for a line of credit?
Many people consider applying when their finances are stable, with regular income and manageable debt, and before funds are urgently needed.

Should I wait until I need the money to apply?
Applying during financial stress can be more challenging. Exploring options earlier can provide more flexibility, even if funds are not used immediately.

Can I get a line of credit with a low credit score?
Approval criteria vary by lender. Improving your credit profile first may increase available options.

How long should I be employed before applying?
Some lenders prefer a period of stable employment. Probation periods may affect assessment.

Should I save or get a line of credit?
Savings are often considered a first step. A line of credit may be used as a backup rather than a replacement.

Is a line of credit suitable when interest rates are high?
This depends on your circumstances, budget, and how the credit would be used. Understanding variable rates and repayment impacts is important.

Disclaimer

IPF Digital Australia Pty Ltd, trading as Credit24, ABN 59 130 894 405. Australian Credit Licence 422839.

The information in this article is general in nature and does not consider your objectives, financial situation, or needs. Lending criteria, fees, and charges apply. For product details, eligibility requirements, and full terms and conditions, visit www.credit24.com.au.