Can a line of credit help you manage debt better?
Wouldn’t it be nice to have some flexibility in borrowing money?
That credit card pressure of paying nearly 20% on outstanding balances can be overwhelming. There has to be a way to manage credit better without having to deal with the pressures of accumulating backbreaking debt.
Or what about student debt? Not everyone can qualify for OSAP but tuition and in some cases paying for residence as well can add up, especially if you pursue higher education beyond a university or college degree and so having an option that addresses that is crucial.
Then there’s major adulting costs like home renovations or other upgrades or other major surprise costs that can come up and you need a flexibility. Different types of lines of credit can help you address each of those concerns (yes, there are business lines of credit as well but this is all about personal financing).
Personal Line of Credit
A personal line of credit takes some work. You’ve got to be able to build up your credit to a point where you actually qualify for a line of credit. It’s the next step after you’ve put in the work with a credit card.
From time to time after you’ve build up enough good credit history, your bank may even have pre-approved offers for you to avail of. These only require a soft check of your credit history as opposed to doing a full application and are definitely worth considering depending on the interest rate on offer (bank’s prime rate plus X%) and the amount (usually minimum $5,000).
Pre-approved offers mean you’ve done well to manage your credit and you have an opportunity, if you’d like, to get yourself set for a rainy day. Remember, you only pay on the amount you borrow so it really can just sit there waiting for you. The worst thing is to not have credit available when you most need it.
Note: A personal line of credit can have a co-signor if you really need one but whoever is co-signing must be absolutely certain in knowing that they are just as accountable for the debt being taken on as primary applicant and so should always be wary of the worst case scenario.
Student Line of Credit
If you’re pursuing a post-secondary education or beyond you’re choosing to invest in future you at a cost for present you. If you’ve made this decision straight out of high school, odds are you don’t have enough of a credit history and it’s okay to ask for help. You’re just going to need it from the people who you trust and who trust you the most.
Most student lines of credit are co-signed by parents or guardians, and the approval will depend on their credit circumstances. Student lines of credit are often, but not always, cheaper than a regular line of credit because of the added accountability in repaying the debt, and it can be a major source of relief as you obtain your education.
Home Equity Line of Credit (HELOC)
This can be a tremendous resource once you’ve built up enough equity in your home and you do this by having paid off a decent chunk of your mortgage. Say, for example, you put a 20% down payment on your home but over years of regular mortgage payments you’ve now paid off an additional 30% of the amount you owed (50% in total), you could theoretically apply to have that 30% you paid off accessible via a HELOC. Note that you can’t have access to the full 50% because you must maintain a minimum level of equity in the property.
The great thing about a HELOC is you’re going to be able to borrow large amounts at virtually the same rate as whatever the current mortgage rates are. Want to renovate the kitchen or the basement? Have an unexpected cost come up that requires major work to fix? This is a great option that offers flexibility in paying it back over an extended period.
*The New Client 2.10% Interest Rate and $150 Cash Bonus Bundle Offer (the "Offer") is available to new Tangerine Clients who: (a) have a Client Number created between November 24, 2020 and July 31, 2021, (b) become a Tangerine Client using the Promo Code “EARNMORE”, (c) open an Applicable Savings Account within 30 days of the date their Client Number was created, and (d) open a Tangerine Chequing Account within 30 days of the date their Client Number was created (collectively the “Offer Qualifying Conditions”). The 2.10% Promotional Rate will apply to deposits made to an Eligible Client’s Applicable Savings Account(s) for 153 days (5 months) beginning on the date all Offer Qualifying Conditions have been met, to a maximum of $1,000,000 (in the currency of the Applicable Account) per Applicable Savings Account Type (for deposits to registered Applicable Savings Accounts made through a T2033 form, please see the full Offer Terms and Conditions). The Promotional Rate is an annualized rate, calculated daily and paid monthly. To be eligible for the $150 Cash Bonus, in addition to meeting all Offer Qualifying Conditions, an Eligible Client must switch their eligible payroll direct deposit for at least 3 consecutive months and must have the first payroll direct deposit received in their Tangerine Chequing Account within 60 days of Chequing Account opening. Limit of one (1) Cash Bonus per Primary Account Holder. The Offer is only applicable to Accounts where the Eligible Client is the Primary Account Holder. Offer is not transferable and can’t be combined with other promotional savings rate offers or chequing cash bonus offers. Full Offer Terms and Conditions, including definitions of any capitalized terms and a list of eligible payroll direct deposits, are available here. Offer may be changed, extended or cancelled without notice.