Pros and cons of a line of credit

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Mortgage Broker, Darwin, Home Loan

A line of credit can be a very appealing idea, with immediate access to the limit of a mortgage and no extra approvals necessary. Used wisely, it can make investment and purchase of commercial equipment simple, but it can also spell disaster for the unprepared.

A line of credit (LOC), also called a home equity loan, allows mortgagees to access the equity in their property as needed. It can be a standalone product or almost any type of existing loan can be split with an LOC. Interest is usually slightly higher than the standard variable rate.
LOCs may be useful for property investors, who can finance further property purchases or renovations using their existing properties’ equity without applying for new loans, or business owners who can use an LOC in place of a business overdraft to make large equipment purchases at lower interest rates.
Used smartly by owner-occupiers, an LOC can be an ideal way to reduce the total interest paid on a loan. An entire salary can be deposited into the LOC account, with everyday purchases being made with the account balance in the same way as they would with a regular savings account or credit card, as long as the minimum repayments, usually only interest, are maintained.
For the term that the amount repaid stays above what it would be on a regular mortgage, the total interest charged is, obviously, lower. Owner-occupiers, however, can come to think of their LOC home loan as a credit card-like facility. It has risks that must be carefully managed.
While it can be a boon for mortgagees who deposit their entire income and use only what they need, resulting in extra repayments being made each month, the lack of requirements beyond paying the interest when due and staying within the credit limit can spell disaster for those with poor financial discipline. If mortgage payments are treated as available credit for everyday expenses, the loan principle may never actually be paid down.
And, while post-GFC lending criteria has certainly tightened, many lenders are happy to extend an LOC when a property’s value increases. In a best-case scenario, this provides access to cash that can be used as a deposit for an investment property or for renovations that will further increase the property’s value. In a worst-case scenario, a mortgagee can quite easily use this for everyday purchases or a holiday, and be left with a loan they cannot actually service beyond interest payments.
There are many situations where a line of credit is ideal, but. as with all mortgage products, the key to assessing whether an LOC suits your needs is to speak to Nick Kirlew Mortgage Broker about your goals, financial situation, lifestyle, needs and wants.

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Thinking of Refinancing?

Why would you let this happen?

Maybe you didn’t know this but a large majority of home owners in Darwin who have a mortgage are needlessly paying more interest to their bank than they need to be …

How do I know?

Well, every day, I help time poor people refinance their loan to a better rate.
The best part about this is I get to hear about how they have used the money they have saved
They all get really excited when they find out they can re channel the savings into things like

A new kitchen fit out
Remodeling their bathroom
Adding an extra room to the house
Some have replaced their car and a few …
They are posting pictures form their overseas holidays.

And some did this, without spending a cent more out of their weekly budget. They just used that surplus that they saved through refinancing and reapportioned it to a better-quality lifestyle.

Isn’t that amazing?

If the thought that you are paying too much interest on your mortgage bothers you, then I have created a 5-point check list that tells you how you could turn this around in your favour.

The 5 Steps To Changing Your Lifestyle Through Refinancing Guide

And the good news is …

It is easy and fast to implement each step.
To receive your copy of the guide click the Learn More button, put in your details and I will email the guide to you straight away.
I’ve seen how following the checklist has put a big smile on my clients faces and I would love to see it do the same for you!

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Nick Kirlew Darwin Mortgage Broker

Arafura Finance Brokers is an Authorised Representative (No. 420372) of BLSSA Pty Ltd, ABN 69 117 651 760. Australian Credit License Number 391237.
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Contact Nick Kirlew Mortgage Broker on 0447 499 794.
Darwin, Refinance, Home Loans, First Home Buyer, Mortgage Brokers.

2/6 Montoro Court Larrakeyah NT 0820