Line of Credit
A line of credit is like a credit card, it give you access to money instantly. The amount you can access depends on the approved credit limit. A line of credit is extremely flexible, you can access the money using an ATM or EFTPOS card, similar to an everyday bank account.
A line of credit can be used for many different scenarios, you might like a line of credit while renovating, or investing in shares of property. A great thing about a line of credit is the interest charged in only calculated on the outstanding loan balance owed – this is calculated daily and charged monthly.
The easiest way to understand how a line of credit works is through an example, if you’re approved for a line of credit of $150,000 to do some renovations. Essentially you have an ability to access $150,000 whenever required. This will allow you to use the money to pay tradespeople and buy materials required for the renovation. You might use $25,000 in the first month, the good thing here is you’re only charged interest on this amount. The second month you might draw down another $25,000, so now you’re charged interest on the new balance of $50,000.
You don’t need to make regular repayments like you do on a standard loan, but, you must make sure you don’t go over your approved limit. You’d need to keep checking your balance regularly and making payments to cover interest charges and withdrawals to keep it under the limit.
A mortgage broker can negotiate on your behalf to get a great Line of Credit offer from one of the lenders on their panel. To find out how Hunter Galloway can help you call Nathan Vecchio on 0410 000 689.