Line of credit loans
Get convenient, flexible funding
A line of credit can be a very useful type of loan for all sorts of purposes, including building and renovations, property and other investments, even buying a new car. ITP Home Loans can advise you on whether one would suit you, and find you the most suitable line of credit rate and type if the answer is ‘yes’.
What is a line of credit?
A line of credit loan is quite similar to a credit card, with interest accruing on the spent balance. There is an approved limit to your borrowing amount, which you can spend bit by bit, or all at once. There are two basic types of line of credit:
- A revolving line of credit is the most like a credit card. When you make a payment on your revolving credit account, this money becomes available for borrowing again. With regular payments into the account, your maximum credit limit may be increased. There is no set monthly repayment, but the interest will accumulate and be capitalised like any other form of credit. A revolving line of credit can be particularly useful to businesses big and small to help prevent cash flow problems, and also for financing capital expansion.
- Non-revolving lines of credit are very similar to the revolving ones, except that your payments don’t affect your amount of available credit. After you’ve paid down the line of credit, the account is closed and can no longer be used.
Secured or unsecured?
Both non-revolving and revolving credit accounts come in secured and unsecured lines of credit:
- A secured line of credit uses an actual asset as collateral. This is most commonly the equity you have built up in your home or investment property. Your line of credit interest rates tend to be a lot lower – around the same as for a home loan – for an equity line of credit than for an unsecured credit account. Home equity loans can be very suitable for big purchases such as a car, as personal or car loan rates are much higher than the home loan rates you get with a home equity loan.
- Unsecured line of credit rates will be higher than secured ones, as you’re not using a tangible asset, such as your home, for collateral.
Is a credit loan right for you?
Line of credit loans have become very popular in recent years and can be a great funding source for certain circumstances. However, they don’t suit everyone:
They’re a great fit if you’re very disciplined about controlling your finances. The reverse is true if you’re likely to use the money for spontaneous purchases.
They can sometimes be expensive, and the extra money you pay may not always be worth it financially.
Your ITP Home Loans broker will advise you on whether a line of credit loan is a good fit for your situation, and also get you the most suitable line of credit rate if you decide to go ahead. So get in touch by emailing us, or make an appointment to see an advisor face to face. Alternatively, give our helpful ITP Home Loans consultants a call today on 1300 387 487.