What is a line
of credit?
A Line of Credit is type of revolving loan with pre-approved credit limit. The line of credit gives the borrower flexible access to funds, whenever they need it.
A Line of Credit is type of revolving loan with pre-approved credit limit. The line of credit gives the borrower flexible access to funds, whenever they need it.
All major Canadian
banks offer lines of credit to their customers. The funds available in the line
of credit can be withdrawn and used at any time. The borrower can withdraw part
or all available funds from his line of credit and they can also repay the
funds back at any time.
A line of
credit is very similar to a credit card because as soon as you repay your
balance in part or in full you can use the funds again. That's why the lines of
credit are considered revolving credit. A line of credit can be unsecured or secured
by the home owned by the borrower up to 80% of the value.
With most banks
you can access the funds in your line of credit by writing a cheque, using your
bank card, and via telephone or online banking. Usually the bank you have
opened the line of credit with, will require a minimum monthly payment of
interest only on the amount you have
borrowed.
One of the major benefits of credit
lines is the fact that they have lower interest rates compared to most credit
cards. Using a line of credit is very convenient and in effect is no different
than using your bank checking account.
Another great benefit is that you can be
flexible repaying your loan. If you have the funds you can repay everything
borrowed on the credit line at once without a penalty. All in one a line of
credit is a great way to have access to funds whenever you need it.
Lastly a secured line of credit is a
great way to protect you from fraud. No one can register a mortgage on your
property without discharging the existing line of credit.
Always be an informed client.
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