Not quite a loan, not quite a credit card…

!/wp-content/files/articles/youtube_logo.png!h3. it’s a line of credit

Hybrids are big right now – hybrid cars running on gas and electric power, hybrid plants have allowed for farming on a mass scale – but in the financial world, there is one hybrid that is sometimes overlooked.

It’s a line of credit. It could be considered the hybrid of a credit card and a loan.

It functions like a credit card in some ways and like a loan in other ways, but is different from both in some important ways.

Lines of credit often carry lower interest rates than credit cards, especially if the line of credit is secured with a property or a deposit.

Unlike a loan, the funds available in a line of credit are available on a revolving basis. That means that when the used portion of the line of credit is paid off, those funds are available again.

Home Equity Line of Credit

Most people have heard of a Home Equity Line of Credit, sometimes shortened to HELOC. It’s a line of credit that is based on the amount of equity in your home. Equity is the difference between the market value of your home and what the homeowners still owes on the home. For example, if the market value of your home is $140,000 and your mortgage balance is $100,000 and there are no other liens on the property, your equity is $40,000.

A home equity line of credit allows you, the homeowner, to use that $40,000 for your needs.

Most often, a home equity line of credit is used for home improvements. Need a new roof? Want to update your kitchen? Need to add on a room to your home?

A HELOC is a good way to get those projects done. You can generally have access to more cash at a lower interest rate with a HELOC, and the interest paid is normally tax deductible. Consult your tax professional for more details.



6 thoughts on “Not quite a loan, not quite a credit card…

  1. Hello,
    I am interested in Home equity line of credit for home improvements. I want to know what is the criteria for this and what is the decision based on for approval?

    1. Thank you for your question Tiffany, we would be happy to discuss this process. Feel free to stop in to any of our branches at your convenience and we can go over this together.

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