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Lines of Credit

A line of credit or LOC works more like a credit card than a typical loan because is has a revolving balance.  An LOC allows you to borrow up to a certain amount for the life of the loan - the maximum term is usually 25 years.  During that time, you can withdraw money as you need it.  As you pay off the principal you can use the credit again, like a credit card.

Example:

Let's say you have a $30,000 line of credit.  You borrow $25,000 for a new kitchen.  At that point you owe $25,000 and have $5,000 remaining in your line of credit, meaning you can withdraw another $5,000.

Instead of withdrawing funds from your line of credit you deposit $5,000 in the account.  At this point you owe $20,000 and have $10,000 credit available.


 Example  
 Line of Credit   $30,000
 Amount Used  $25,000
 Available Credit  $5,000
   
 Amount Paid Back   $5,000
 Available Credit  $10,000

 

The interest only term for a LOC is usually 25 years with no requirement to pay the principal until the end of the term eg. If the balance is $20,000 outstanding then the principal is $20,000.

A line of credit has a variable interest rate that fluctuates over the life of the loan. Payments vary depending on the interest rate and the amount owed.  Minimum monthly repayments cover only the interest, although you can elect to pay the principal at any time.

A line of credit can also be used for investment purposes such as purchasing an investment property, managed funds or shares.

You can apply for a line of credit in addition to your existing home loan when you have enough equity in your property it can be used as security for a line of credit.  For more details on borrowing against equity click here

Should you have any questions or would like to make an equiry about arranging a new line of credit please contact us on 1300 734 410.