Line of credit?

[TheWowEffect]

Hi everyone,

Can someone educate me on opening a Line of Credit? How does it work? Can someone with an average credit score(around 650s) get it? What are some of common financial institutions to go to?

Thanks,
TheWowEffect

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[etf]

Hi everyone,

Can someone educate me on opening a Line of Credit? How does it work? Can someone with an average credit score(around 650s) get it? What are some of common financial institutions to go to?

Thanks,
TheWowEffect

i know the process at places like wells fargo and bank of america is pretty painless, but the thing is, personal lines usually have super high interest rates (i think wells is at 14%). what do you need it for, anyway?

 

[mshheaddoc]

Depending on the use for your Line of Credit (LOC) you have a few options. First would be a credit card. Second would be a personal LOC with a bank and finally a home equity LOC. If you don't have a home, than the last one is out. That one would give you the best rate.

The credit card I think would be one of the better deals with your credit score as personal lines of credit are often a higher interest rate with you local banks but I would go in and talk to some of them (and any credit unions you belong to!).

Personal LOC might have an application fee (I would hope most don't!) but they might claim they have a fee for doing the loan (possible an annual fee of say 1% of the total line value - but they SHOULDN'T be charging you so be weary!) usually you are only charged for the amount that you use but you have to be careful because your rate is based on your credit score and if you have an account with them. So go to the bank where you current bank and discuss with them. I have a small LOC that I use as an overdraft protection. Its only $1000 but its great to have for when I need it. I use credit cards for my LOC. (Bad I know, but one day I won't be a student!)

 

[TheWowEffect]

Thanks for the responses

I don't need it for anything right now but I have heard of people using it for various purposes, including for putting a down payment when starting a business or buying a franchise. My wife might buy a franchise(presumably a safe one) even while I am a resident and we will need a down payment for that. I have heard that MBNA gives good deals. Credit unions are another good option. People sometimes use personal LOC for consolidating bad credit cards or for personal expenses but I am not thinking of any of these.

Comments/ideas/suggestions?

 

[mshheaddoc]

Sorry for the delay, as for franchising, rather than a LOC I'd suggest that you get a business loan if at all possible. You might get a better rate than an unsecured LOC but you'd probably have to put up some collateral. If you have the equity in your house, some have used a HELOC and I know others that have maxed out their credit cards. As a former commercial banker, please don't do the latter. If you are serious about a business venture, doing it all in personal credit is the only option for some but look into business loans (specifically SBA and the like) because they will help you in the long run in building commercial credit.

 

[CookieBear]

Your wife may wish to consider looking into any local women's business support groups. They may actually work with a lender who may have loan programs for women owned starter businesses.

It's a long shot, but far back, I recall reading up a bit on it.

A business plan would be a good thing to whip out in those cases, to show that she is serious, etc.