Credit line loans

If your circumstances change (e.g. your salary increases or your credit rating improves) or if you initially requested a credit limit lower than the one you were approved for, you may be able to apply for a credit limit increase.

Depending on your income, credit score and the lender’s rules, you may be able to borrow up to six times your monthly income (or possibly more). You will be assigned a credit limit on this basis, and you can use your credit line up to this limit, withdrawing only what you need each month.

Alternatively, you can choose to withdraw upfront an amount equal to your maximum credit limit, and make monthly repayments equal to or in excess of a specified amount, for example the greater of 3% of the balance or $15.

A line of credit loan may have a fixed term, meaning that any balance outstanding must be repaid within a given period (e.g. 1-5 years). Or it may be a continuing revolving line of credit, allowing you to use it at will for as long as the lender permits the loan facility to continue, provided you always make at least the minimum monthly repayment required.

Depending on the lender you will be issued with a cheque book, or an ATM card, or both.

You may be able to borrow up to six times your monthly income (or possibly more), depending on your income, credit score and the lender’s rules.

It mostly depends on how much you borrow. Typically you would be required to make monthly repayments of at least the greater of 3% of your loan balance or $15. If you make an upfront cash withdrawal equivalent to your maximum credit limit, e.g. $30,000, a 3% minimum monthly repayment in the first month would be $900, declining to about $880 in the second month (depending on the interest rate) and continuing to diminish each month if you make no further withdrawals.

Alternatively, if you make varying withdrawals and repayments each month, depending on your needs, your minimum repayment amount will increase or decrease along with the balance outstanding. For example, you might withdraw $5,000 in the first month, in which case a 3% minimum repayment amount would be $150. If you withdrew a further $2,000 in the second month, your total outstanding balance might be about $6,900 (depending on the interest rate) and a 3% minimum repayment would amount to around $207. In the third month you might choose to repay $1,000, reducing your minimum repayment (depending on the interest rate) in the fourth month to around $175.

You will be required to make monthly repayments.

It is always useful to have a readily accessible source of cash for emergencies or greater than usual calls on your cash resources. For example:

• Medical emergency or medical expenses not covered by insurance
• Family emergency
• Holiday
• Wedding and honeymoon
• Home renovation
• Debt consolidation
• Education expenses

A credit line loan gives you extra cash to use for whatever purpose you choose, whenever you choose.