It is a loan that works more like a credit card. You are allowed to borrow up to a certain amount for the life of the loan time limit set by the lender. During that time you can withdraw money. As you pay off the sum of money lent or invested, your credit revolves and you can use it again.
These loans can be beneficial when accessing the equity in your home to use for things like home renovations, investments or other personal purchases.
The repayments on a line of credit loan are determined by the interest rate applicable at that time. If you have enough equity in your home, you will need to make another application for a line of credit loan.
You also have the advantage of being able to make unlimited repayments as your repayments are not set. However, you must check the conditions of these loans as they are sometimes more expensive than your usual options.
A line of credit is also a popular choice with property investors as it gives them immediate access for a cash deposit, and the ability to keep their properties separate from each other.
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