Shopping for Your Line of Credit – Part 2

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Shopping for Your Line of Credit – Part 2

In our last post, I provided two templates for your use. I created a simple list of action items called Your Next Step Checklist. To keep track of the features offered by financial institutions in your area, use this second template called Your Line of Credit Shopping Comparison.

We also reviewed that if you own your home, one of the cheapest types of lines of credit is a home equity line of credit. You learned how to calculate the amount of equity in your home and what most financial institutions will require.

What do you do if you don’t have enough equity in your home or you don’t own a home?

Recap of Our Profile

In the example we’ve been using, you deposit $5,025 in the bank each month, your monthly expenses total $4,025 (This includes your mortgage payment of $1,364.40), your mortgage balance is $233,000 and over the past sixteen months you have saved $24,000. To use the CashMap strategy you only need a $6,500 line of credit.

Your Reason for Considering Their Line of Credit

The first question the loan officer will ask you is, “What do you plan to do with the line of credit?” Your answer is, “Debt Reduction Strategy”. You will catch them by surprise. Let them know that you will provide the details of your debt solution with your application.

Ask About a Personal Line of Credit

You have a $24,000 emergency fund that will cover almost six months of living expenses. Many banks will allow you to use your savings as collateral for a line of credit. This will lower the interest rate that the financial institution will charge you.

Few consumers ask for a personal line of credit that is secured by cash. Don’t be surprised if you don’t this on their website. Be prepared to call and ask for additional information. Remember, you do not want a fixed loan payment. You want the flexibility of withdrawing, repaying and withdrawing from your personal line of credit. Look at the following links from Union Bank and CIBC. Union Bank has branches in New York, California, Texas, Illinois, Washington and Oregon. CIBC is a Canadian Bank.

Don’t Let the Bank’s Website Discourage You!

You’ll quickly see, that both bank’s websites are expecting you to borrow funds and gradually pay it off over time. Don’t let this bother you. When they ask you for the period of time you want to have access to the line, ask what is required to renew the line. Is there a renewal fee? Do you have to pay off the line before it can be renewed (Probably not!) The shorter the term, the lower the interest rate.

In my next post, we’ll cover over draft protection.

Ready to start your journey towards financial freedom? Get started today!

I’d love to hear from you. Please send your questions, topics or suggestions to dennis@cashmapconsulting.com. Thanks!

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