A Line of Credit is like a personal overdraft or very large credit card. Lines of credits are commonly used to raise funds for investment or personal use by providing cash up to set limit which remains in place for the full term of the loan.

Payments are made on an Interest Only basis for the full life of the loan where the Line of Credit is an evergreen facility.
 

Pros:
  • Extremely flexible allowing you maximum access to equity
  • Offers similar flexibility to credit cards and over drafts at much lower, home loan interest
  • Simplifies and centralises all repayments and maximises interest offset opportunities
Cons:
  • May attract a small interest rate loading (usually around 0.05%)
  • You need to be disciplined to make sure you are actually paying your loan off or managing it to your own financial goals
  • Can be very dangerous for inexperienced borrowers or borrowers without clear financial plans who regularly monitor their financial position

 

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