When you apply for a personal loan with any of the banks or lending firms in Australia, you might be offered different types of personal loan, one of which is the line of credit. This type of loan is designed to help a borrower have access to funds when needed. An unexpected family emergency may require a considerable amount of money which your account may not be able to sustain. The bank or lending firm can come to aid by providing the borrower with access to a form of personal loan for an agreed loan term.
It is a form of a safety net where even little and unexpected needs for cash will be addressed by this line of credit. The majority of banks and private lending firms in Australia offer a line of credit to personal loan applicants. This type of personal loan is an equity line where an approved limit of borrowings can be used in small amounts or in a lump sum.
It can be likened to a cheque book with interest charged on the amount used and accruing on the balance of the line of credit. The credit limit is determined as the percentage of the property’s value which is equivalent to about 80%. Calzoncillos Boxer Calvin Klein Say, you have a property with market value of $200,000. If you use this as collateral for your personal line of credit, the approved credit limit for your personal loan via a line of credit is set at $160,000. This is the amount that you are given access to by the bank. You may use this amount in one go or you can use it in small amounts in different times.
Benefits of a Line of Credit
This type of personal loan is usually approved for borrowers who have a reasonable amount of equity in their homes. Comprar Boxer Calvin Klein Baratos A borrower may use his home as collateral to fund a new car through a line of credit. What makes this a better loan type option is that you are in essence borrowing for a car at home loan rates, which are relatively lower than conventional loans like car loan or unsecured personal loan.The only downside to this is that it will take longer before you can finally own your home once again.
Aside from low interest rates,a line of credit will also provide you with greater flexibility in the size and timing of loan repayments, keeping a major portion of the credit limit in the account longer, which saves you interest.
While this loan type may seem like the best thing for a borrower, it should be noted that most come at a price and the extra funds drawn from the loan used for the intended purpose may not pay off financially and this could cause the borrower the burden of repaying the used portion of the credit limit.
Who This Loan is Best For
A borrower who has strict discipline in managing his everyday finances is the best borrower for this type of loan. As mentioned earlier, if the intended purpose for the loan didn’t work out as expected, the borrower will definitely have difficulty in repaying the spent credit line. So, unless you are sure about how you will repay the spent amount and that there is a sure source of fund for repayment, this type of loan may prove to be a tempting facility for a borrower to use the allowed credit line for impulsive purchases, etc.
It’s a different scenario if you are using the funds from the credit line for investing in a property which will potentially earn a good return, then this type of loan may be put to good use and will likely increase your net wealth.
So if you’re planning to avail this type of personal loan, you don’t have to go out of your home just to borrow.