Line of credit
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Having trouble with your line of credit? We can help
Are you struggling to cope with debt as a result of a line of credit and unpredictable interest? Harris and Partners is a specialist licensed insolvency trustee (LIT), providing debt relief solutions to help people overcome their debt problems.
What is a line of credit?
A line of credit is a loan from a bank or financial institution that gives borrowers the flexibility to borrow the funds that they need up to an agreed limit. A line of credit allows borrowers to use as much or as little funds as they need and allows them to make repayments straight away or over time.
You only pay interest on the money you borrow.
How do line of credit interest rates work?
The rate of interest on a line of credit can increase or decrease over time. You are expected to pay interest on any funds you borrow from the first day of withdrawing up until you pay back the full amount you have borrowed.
Credit rating can affect interest rates
If you have a poor credit score, this may mean that you have to pay interest fees. Lenders will use credit score information to determine how reliable you are as a borrower and the higher your credit score, the lower your line of credit interest.
You will be able to find out your credit score and credit history on your chosen credit report.
Getting rid of student loan debt
Home equity line of credit (HELOC)
When you’re a homeowner, you want to be able to build up equity over time and a home equity line of credit (HELOC) can enable homeowners to get the money they need for renovation or to pay off debts.
A HELOC looks like a second mortgage and works in the same way as a credit card. However, this type of line of credit is a revolving credit line and your home is collateral.
HELOC is secured against your home equity value and so lenders are likely to offer lower interest rates than they would for other types of personal loans.
You may use a HELOC for renovation, education, debt consolidation, business ventures or other. However, should you find yourself struggling with debt as a result of your HELOC, we can help offer you the best solution.
Business line of credit
A business line of credit (LOC) allows a borrower to access a fixed amount of money to be used on business needs. This is often used to provide funding for short-term issues or needs such as the following:
- Buying inventory
- Repairing equipment
- Marketing campaigns
- Cash flow gaps
One of the main differences between a business line of credit and a small business loan is that a loan is usually fixed and interest rates are dependent on the full amount of the loan whereas lines of credit interest rates vary and only apply on the funds that you withdraw.
With a business line of credit, businesses will be able to access a certain amount of money to dip into when and if needed but it is important that this is a short-term solution to day to day business needs rather than something you need to get out of a lot of debt.
If you are struggling with debt as a result of a business line of credit, then we can help find the best solution for you.
Student line of credit
A student line of credit allows students to pay for expenses related to their education, for instance tuition, resource materials and day to day living.
Student line of credit interest rates may be lower than the rates on government student loans. However with a loan like this, you have to start paying interest immediately after you borrow whereas with a standard government student loan, you start paying once you’ve finished the course.
You will normally have to provide proof of your student status at a recognized Canadian institution in order to be eligible for a student line of credit.
If you are struggling to manage your student line of credit, then we will find the best solution for you.
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Personal line of credit
A personal line of credit allows borrowers to withdraw however much money they require for a set amount of time. If you take out a personal line of credit, you can access these funds via bank transfer or line of credit checks.
Generally a personal line of credit allows you to borrow between $1,000 to $100,000.
As with any type of line of credit, interest rates are charged only on money that you withdraw until you have paid off your debt.
With personal lines of credit, there is no collateral however sometimes you may be able to choose items as collateral in order to obtain a better agreement.
If you are struggling to pay back your personal line of credit, we are here to help find the best debt solution for you.
Line of credit FAQs
How does a line of credit work?
A line of credit allows borrowers to borrow money up to a pre-set limit and is a flexible form of borrowing as it allows borrowers to take out funds when needed and as much as they need.
How do I apply for a line of credit?
A line of credit will usually be offered by banks. If you are struggling for cash either on a personal or professional level, then you can apply for a loan or line of credit which allows you to borrow money when you need it up to a set amount.
You should be able to apply online to your lender.
How do I qualify for a personal line of credit?
Lenders will take into account a number of factors when it comes to granting lines of credit, one of them being your credit score. Lenders will want to see that you are reliable with money and that means that a poor credit score may limit the amount you can borrow or mean that your application does not get approved.
Qualifying for a personal line of credit is at the discretion of the lender.
How much line of credit can I get?
The set amount of funds that you are able to borrow with a line of credit is dependent on your pre-set limit and unique circumstances.
Will having a line of credit affect my credit score?
If your application for a line of credit is approved and you accept it, then this will appear on your credit history as a new account. If you only take out a small amount of the whole fund available, then this can improve your credit scores but if you take out a large amount of the loan then this can lower your score.
If you fail to make payments on time, this can also impact negatively on your credit score.
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