A Credit Line can be used to pay for everyday expenses, home renovations, investments, to pay off other, higher interest debts and more. Even if you don’t need to borrow right away, it may make sense to apply for a Line of Credit as part of your financial plan. Once your line of credit has been established you can relax knowing you are ready for emergencies, investment opportunities or unplanned expenses.
Credit is established by using the equity in your real estate holdings or other guaranteed investments to secure a higher credit limit. Because there is a collateral assignment of the property, usually interest rates being charged are lower. Often rates are as low as prime, depending on your credit standing. The interest rate on a secured credit line is usually variable, and will rise and fall with changes to the Prime Rate. Credit limits are typically established from $5,000, to as much as 80% of the equity your home, less any current outstanding mortgages.
Credit is established without any security required as collateral. The interest rate charged is usually higher than a secured line of credit and is based on your financial standing and credit history. Like the secured line of credit, the interest rate on an unsecured credit line is usually variable, and will rise and fall with changes to the Prime Rate.
Robin Muir, CFP®, CLU®, CH.F.C.