(Closed) Can someone explain to me how a Line of Credit works??

posted 8 years ago in Money
Post # 3
Hostess
18643 posts
Honey Beekeeper
  • Wedding: June 2009

I think what they meant is that you can get away with an interest only payment but you will have to pay the principle eventually just like any other loan.  Some lines of credit are balloon payments where you have to come up with a huge payment in a few years to pay it off.

Post # 4
Member
2475 posts
Buzzing bee
  • Wedding: June 2010

Yeah, there’s no such thing as a loan that doesn’t need to eventually be completey paid off.  She was probably just referring to making interest payments.

Anyway, a line of credit is like the bank making a certain amount of money available to you, but you don’t have to draw on it unless you want to.  You could get approved for an 80k line of credit, and then maybe draw out 10k one month, and then maybe 20k another month.  You should only have to pay interest on the money you take out.

Post # 5
Member
2226 posts
Buzzing bee
  • Wedding: May 2010

I work at a bank and @tulip is right.  A LOC is basically a loan you can use if you need it.  If you don’t use it, it just sits there.  You only pay the interest on what you’ve spent on it.  It’s almost like a credit card without the plastic. 

Post # 7
Member
272 posts
Helper bee
  • Wedding: June 2011

So, do you have to get approved for a Line of Credit, from a bank, just like a credit card?

Post # 8
Member
272 posts
Helper bee
  • Wedding: June 2011

So, do you have to get approved for a Line of Credit, from a bank, just like a credit card?

Post # 10
Member
2226 posts
Buzzing bee
  • Wedding: May 2010

Yes, you could get a LOC to pay off your credit card.  My bank has a loan called a “pay any day loan” where as long as you pay in the month it’s due, it’s not late.  That gives you a little wiggle room.  You would come into a bank and apply for a LOC.  It’s a little more involved than applying for a credit card (you can’t just apply online and get approved in an instant, in most cases).  The LOC is good because once you pay it off, you still have the line of credit to use for something else if you need it. 

Post # 12
Member
2226 posts
Buzzing bee
  • Wedding: May 2010

Most likely!  Good luck with it!!

Post # 13
Member
2004 posts
Buzzing bee
  • Wedding: November 2008

Check into the interest on the line of credit before you get one…I had one a few years ago and the yearly APR was 48%. Yes, you read that right.

Post # 14
Member
5154 posts
Bee Keeper
  • Wedding: June 2010

@candynee THANK YOU! that made so much sense…I need stuff like that simplified! :X

Post # 15
Member
2226 posts
Buzzing bee
  • Wedding: May 2010

@Sulli301 – you’re so welcome!  I tend to need things in “cliff’s notes” for me, so I pass it along!  Smile

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