When to Draw on a Line of Credit?
When to Draw on a Line of Credit?
It is usually an unsecured line of credit, which means you do not have to offer up collateral to get this kind of loan. On the other hand, a secured line of credit refers to one that requires you to put something up as collateral to protect the lender if you default. Here are some situations when it is best to use this option.
When you need the funds for a home improvement task, for education expenses, or other kinds of major costs, a home equity line of credit or a secured one is perhaps a good idea – provided that you know you will have the funds for paying back. A good thing with a HELOC is that the interest that you pay on it may be tax-deductible.
A personal or unsecured line of credit (LOC) might just help you consolidate many small debts that you are repaying into a lump sum with a lower annual percentage rate while avoiding using any collateral (depending on your creditworthiness and terms of each credit line).
