9 Things You Need To Know about Lines of Credit!

Lines of Credit: Things You Need To Know

What is a Line of Credit?

A personal Line of Credit is basically a loan that you do not start paying interest on until you start to use it. You can use as much of the Line of Credit as you want up to the maximum and as long as you make the minimum monthly payments that are set by the lender. 

Where can you get a Line of Credit?

You can apply for a Line of Credit through Banks and Credit Unions and Mortgage Brokers. Most Lenders allow you to apply online.

What is the difference between Secured and Unsecured?

A secured Line of Credit is backed by GICs or the equity in your house. When your line of credit is secured, the risk to the bank is lowered which will allow them to offer you a lower rate and a lower monthly payment and sometimes even a higher limit.

How is the limit determined?

Generally you can obtain a line of credit from $5,000 to $500,000.  It depends on whether it is secured or unsecured. Lenders review your credit score, income, the amount of other outstanding financial obligations you already have such as car payments, your mortgage and any other loans you might have.

Is it easy to access a Line of Credit?

You can access your Line of Credit with the cheques provided or you can withdraw cash from an ATM or move money from your other accounts. One thing to remember is you must start making payments as soon as you borrow from it.

How much interest will I pay on a Line of Credit?

A Line of Credit’s interest rate is generally 1 to 3 percent higher than the bank’s prime rate. These rates will fluctuate as the bank’s prime rate moves up and down when the market changes. Keep in mind that if you have a high balance on your Line of Credit with a low interest rate and interest rates go up, so does your minimum payment.

Can I use a Line of Credit for investing?

With the above noted advantages you are able to borrow to make an investment such as Mutual Funds or RRSPs, even investment property.  The interest you pay on the amount borrowed can be used as a tax deduction.

Can you purchase insurance for a line of credit?

Yes, you are able to purchase insurance for your Line of Credit in case of injury or death. Your balance will either be suspended or fully paid off.

Credit is easy to Obtain.  Don’t overextend!

Know your own limit. Don’t treat a Line of Credit like an extra income source.  It is designed to help with those unexpected or emergency happenings in life not to support everyday living.

When it comes to your biggest investment, don’t trust just anyone.  Let the combined experience of “Your Durham Mortgage Solutions Team” at Mortgage Intelligence guide you to a low rate and the right terms. Apply now.