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Lines of Credit

In addition to traditional mortgage products, we are pleased to be able to offer qualified clients access to secured and unsecured lines of credit. Here is some information that explains the features of these products and the differences and benefits of each.

A personal line of credit is a lending agreement between a financial institution and an individual that allows you to spend up to a certain amount. Unlike a regular loan, you don’t start paying interest charges until you decide to use it and the money does not have to be used for a pre-specified purchase. You can use as much of the line of credit as you want, and pay back any amount as long as you make the minimum monthly payments set by your lender. Minimum payments may be a combination of interest and principal or interest only. Lines of credit come in both secured and unsecured forms, and there can be significant differences between the two.

Secured Credit Secured lines of credit are used in both personal and business credit. When a lending institution loans money on a secured basis, this means the loan is secured via real assets. Property or equity in property can be used as collateral, and if the loan is defaulted on, the lending institution will recover the money when the property is sold. A secured line of credit that uses property as collateral is called a home equity line of credit or HELOC. Given that this product is backed by real assets, there is a lower risk to the lending institution, therefore this type of product generally has a lower interest rate and higher limit if the equity is available. [if !supportLineBreakNewLine] [endif]

Unsecured Credit The greatest benefit of an unsecured line of credit, is that there is generally less paperwork involved in the application process and the loan decision can be made quickly. This type of product is usually harder to qualify for, as the approval is based solely on credit history and requires a good credit score. An unsecured line of credit can be used to consolidate existing debt in high interest rate products such as credit cards, and can be useful for unexpected expenses when funds are needed quickly. Interest rates will be higher than secured credit because there is a greater risk to the lender [if !supportLineBreakNewLine] [endif]

Overall benefits A personal line of credit limit can start at $5,000 and go up to hundreds of thousands or more depending on whether it is secured or not and on other factors such as your income, credit score and the amount of your other outstanding financial obligations, like car payments, mortgage payments and other loans. Lines of credit come with a much lower interest rate than most credit cards, usually 1 to 3 per cent above the bank’s prime rate, versus up to 28 per cent for some department store credit cards. All line of credit rates are variable, meaning they change with the bank’s prime rate. As interest rates rise and fall, so does the rate on your line of credit.

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