My bank is offering me a pre-approved LOC; the rate is 2% above Prime (6% I think). The rate will always stay the same. I know I will have to pay it back, similar to a loan. I have a balance on my credit cards at this time. Is it a good idea?
2006-11-23 07:19:53 · 3 answers · asked by AJA 1 in Business & Finance ➔ Credit
If you can switch from high credit card interest to lower rates on a line of credit, it could work to your advantage.
Just make sure you keep up with monthly payments.
A line of credit gives you a miximum amount of available credit which is nice to know you have in emergencies.
Never go close to that maximum line!
Try to stay well below it.
2006-11-23 07:24:01 · answer #1 · answered by Anonymous · 0⤊ 1⤋
A line of credit is essentially a pre-approved loan.
Unlike typical loans you don't have to take the money now and start paying it back with interest, you can take it at your convenience.
It depends if the LOC is secured, eg. Home Equity Line Of Credit (HELOC), most people leave it as an emergency fund unless it is used to improve the home. That way if you default on your loans your home doesn't automatically get taken away...It'll probably still happen but it a longer journey for CC which allows you more time to figure out what to do.
2006-11-23 15:28:41 · answer #2 · answered by feanor 7 · 0⤊ 0⤋
Just because you have a line of credit does not mean you have to use it. Yes, I would get approved for it but I would keep it in case of emergency and be sure what the handling fees and administrative fees are and be certain of the interest and that it cannot go up
2006-11-23 15:28:06 · answer #3 · answered by Anonymous · 0⤊ 0⤋