We recently applied for a Line of Credit
from a local lender. After a look at
our credit history, and after providing
proof of employment, driver's license
information and identification we were
approved. We decided to take out this
Line of Credit as a buffer for emergency
situations and to pay off a couple of
bills that were getting into the red
zone. We recently shuffled around our
work situations and the bit of down
time between jobs quickly caught up
with us. So, to buy a bit of leeway
and breathing space, we decided to get
a Line of Credit.
The interest rate on our Line of
Credit is pretty ridiculous. Similar
to the insane charges on a credit
card. However, we intend to pay off
the balance almost immediately since
the monthly credit charge is only
about 2.5%. It just doesn't make sense
to carry a balance for any length
of time.
It's nice to have the buffer of a
Line of Credit. This way we know that
if anything dire came up, like an
emergency car repair, we always have
money handy in a crisis. Of course,
the biggest danger is temptation.
During the long winter months, a nice
vacation to some hot travel destination
definitely sounds enticing. How easy
it would be to throw caution to the
wind and run up that Line of Credit
in the blink of an eye!!
So too, we have small children. Kids
always need something. They're always
growing out of their clothing and
shoes or else there's some great toy
or sports equipment that they simply
must have, and before you know it
you've blown a couple of hundred bucks!
It would be very nice to go on a shopping
spree as well - things that are all
accessible, but not recommended, with
a Line of Credit.
Having a Line of Credit is great
in a pinch, and as long as it's managed
well, is a great asset to have at
your disposal. It gives some peace
of mind, can bail you out when you
get in a corner, and comes in handy
if you know when you can pay it back.
Leaving a large balance owing, for
an extended period of time, can result
in horrendous interest charges, so
paying the balance down right away
is always your best bet.
Also, if you have an excellent credit
rating, then you can get better terms
on your Line of Credit. However, it's
just as likely, that you're getting
the Line of Credit to get you out
of a slightly tight situation, in
which case, your interest rate is
probably a lot higher and carrying
a significant balance for an extended
period is not desirable.
