Line of Credit
Line of credit have become popular due to their flexibility and features.
A line of credit home loan is a credit facility secured with a mortgage on a residential property. They are like a credit card as they allow you to withdraw funds up to a set limit.
This sort of loan can be used for most purposes. As long as you make the minimum monthly repayments, you can use the line of credit for renovations, investment or purchase a new car.
In Summary
- They make it simple to access the equity in your home, with many line of credit offering cheque books, ATM cards, online and phone banking
- withdraw up to your credit limit without having to gain pre-approval
- credit limit amounts are usually higher than credit cards
- interest rates are lower than credit cards
- interest on the credit facility can be minimised by directing all your income into your home loan account
- consolidate your debts by transferring other debts such as personal and car loans into your mortgage
Risks
While these loans give borrowers considerable freedom, they are not for everyone.
Like any credit card account, line of credit loans require financial discipline and good budgeting skills to stay within your financial limits.
However if you are careful with your money and want the flexibility a line of credit offers, this type of loan may suit you.
