Line of Credit Question

[Frankie3s]

Who do you use and who is offering the best rates for both secured and unsecured lines of credits?

Thx.

[pitz]

Who do you use and who is offering the best rates for both secured and unsecured lines of credits?

Thx.

Interactive Brokers. 5.25% on amounts > $110k Canadian. Secured with stock.

[PuppyB]

Pls bear with me if my following question does not sound right. Why people use line of credit? I am just curious, usually people use LOC for what purpose?:| :| :|

[adamtheman]

Pls bear with me if my following question does not sound right. Why people use line of credit? I am just curious, usually people use LOC for what purpose?:| :| :|

Re-investing money. If you can get a 110k LOC for 5.25% a year and then invest it at 10% you can make a lot of coin. Also, sometimes you have your money tied up in investments and need to turn them into cash without selling them. Even big companies take out huge bank loans.......

[PuppyB]

Wow, really, that sounds cool:razz: . But I know lots of investment does not guarantee high return rate, what if the return rate even is lower than the rate of LOC, then people lose money??


Re-investing money. If you can get a 110k LOC for 5.25% a year and then invest it at 10% you can make a lot of coin. Also, sometimes you have your money tied up in investments and need to turn them into cash without selling them. Even big companies take out huge bank loans.......

[pitz]

Well say you want to buy a car. And you have a house, or a bunch of investments. Instead of going through a process to get a car loan approved, a LOC is just 'there', waiting to be drawn upon at a moment's notice. You don't have to go to the bank, go through a credit check, cross your fingers, etc. The money is just 'there', waiting to be drawn.

Lots of people/business have erratic cashflow as well, and erratic expenses. A LOC means they don't have to go to the bank every time they come up short.

[pitz]

Wow, really, that sounds cool:razz: . But I know lots of investment does not guarantee high return rate, what if the return rate even is lower than the rate of LOC, then people lose money??

True. Thats why investment is risky. It becomes even riskier when its done with borrowed money, but the returns can be higher as well.

Typically the value of investments go down as interest rates rise. This is because borrowing money to invest becomes a losing or somewhat less profitable proposition, and less people want to do it, reducing investment demand.:arrowd:

[PuppyB]

I know, LOC is very handy, but I just hate to pay interest. That's why I am curious why so many people like use LOC....maybe I am weird. :(


Well say you want to buy a car. And you have a house, or a bunch of investments. Instead of going through a process to get a car loan approved, a LOC is just 'there', waiting to be drawn upon at a moment's notice. You don't have to go to the bank, go through a credit check, cross your fingers, etc. The money is just 'there', waiting to be drawn.

Lots of people/business have erratic cashflow as well, and erratic expenses. A LOC means they don't have to go to the bank every time they come up short.

[pitz]

I know, LOC is very handy, but I just hate to pay interest. That's why I am curious why so many people like use LOC....maybe I am weird. :(

Why would you hate to pay interest? Especially if it allows you to accomplish your goals, such as starting/running a business, getting educated, investing, etc?

At the end of each year, I look at my finances, and go 'woohoo' if I spent $50k on interest charges in the past year. Essentially it means I get almost every dime I paid in income tax back.

[notanexpert]

I know, LOC is very handy, but I just hate to pay interest. That's why I am curious why so many people like use LOC....maybe I am weird. :(
Well, I hate paying interest too, but I can't exactly pay cash for everything I want or need so a LOC makes it possible. I like to use mine to pay for investments anyway, so hopefully I can make money and therefore won't feel that bad about sharing some of it with the bank.

[Hellfire]

I deny ppl LOCs all day long. Those that don't qualify for a LOC usually get stuck with loans.

[iluvmikeharris]

Who do you use and who is offering the best rates for both secured and unsecured lines of credits?

Thx.

chequing account: you pay the pigs at the bank fees to use your own money
line of credit: no fees, and you only pay interest when the balance is negative

[iluvmikeharris]

I deny ppl LOCs all day long. Those that don't qualify for a LOC usually get stuck with loans.

That's why the prudent thing to do is to get qualified for the LOC while you can, rather than waiting for your credit to sour when you need it.

[Arkaine]

Why would you hate to pay interest? Especially if it allows you to accomplish your goals, such as starting/running a business, getting educated, investing, etc?

At the end of each year, I look at my finances, and go 'woohoo' if I spent $50k on interest charges in the past year. Essentially it means I get almost every dime I paid in income tax back.

So, are interest payments from LOC's tax deductable?

[ramoose]

Why would you hate to pay interest? Especially if it allows you to accomplish your goals, such as starting/running a business, getting educated, investing, etc?

At the end of each year, I look at my finances, and go 'woohoo' if I spent $50k on interest charges in the past year. Essentially it means I get almost every dime I paid in income tax back.

One reason for a LOC is for investing so let say you borrow $100000 and it costs you $5000. a year in interest you can write that off on your income tax. now that $100000. is in mutuals and it makes 12% in the year you have now made
$8300. profit. $5000 save 30% tax = $3500. made $12000 - $3500.= $8500.
but now you have to pay tax on the $8500. - 30% net $5950. not bad for not using YOUR money

[Bullseye]

So, are interest payments from LOC's tax deductable?

If you are using the borrowed funds to buy certain investments, yes. For personal use, no.

[gizmo8]

One reason for a LOC is for investing so let say you borrow $100000 and it costs you $5000. a year in interest you can write that off on your income tax. now that $100000. is in mutuals and it makes 12% in the year you have now made
$8300. profit. $5000 save 30% tax = $3500. made $12000 - $3500.= $8500.
but now you have to pay tax on the $8500. - 30% net $5950. not bad for not using YOUR money

its not that simple,you must factor in medium income,other taxable incomes and if you even make any profits from mutual funds.

[jmc0]

Who do you use
I use bmo, not a good rate at P+2% PLOC (unsecured)

and who is offering the best rates for both secured and unsecured lines of credits?
usually the 'best' rate will depend on your credit and other factors (such as assets and other dealings you have with them.)

Interactive Brokers. 5.25% on amounts > $110k Canadian. Secured with stock.
Aside, this brings up a thought (I know it's not the same), I guess I already got something similar to a secured LOC (at around prime rate+/-1% depending on acct size) with my broker, using my margin account (i.e. As long as the investment is stable, I can take some cash out, pay only interest, repay back whole amt anytime, etc.)

[PuppyB]

So in another word, is it called margin profit? :razz: :razz: :razz:


One reason for a LOC is for investing so let say you borrow $100000 and it costs you $5000. a year in interest you can write that off on your income tax. now that $100000. is in mutuals and it makes 12% in the year you have now made
$8300. profit. $5000 save 30% tax = $3500. made $12000 - $3500.= $8500.
but now you have to pay tax on the $8500. - 30% net $5950. not bad for not using YOUR money

[Arkaine]

If you are using the borrowed funds to buy certain investments, yes. For personal use, no.

wow Bullseye comes through with a Bullseye.
I never realized this.
My credit is impeccable, I should think about getting into something like this.
Anyone here borrow to invest?

[notanexpert]

wow Bullseye comes through with a Bullseye.
I never realized this.
My credit is impeccable, I should think about getting into something like this.
Anyone here borrow to invest?

I do, and I'm sure lots of others on RFD do that as well. I sleep just as well having paid cash for my $20k car and borrowed $20k for investments. Others sleep much better having their $20k in investments and borrowing $20k for a car. Don't quite get that since its totally the same amount of debt and I get to deduct the interest at tax time. How much you leverage is all up to how much you can sleep with comfortably.

[shahn2]

Personally, I rather pay the LOC's Prime + 2% interest as compared to a credit card's 18+%! Also, I think it gives you a good cashflow for personal use as well. I mean I am not sure how many people have that rainy day's next egg stowed away? This can be helpful in those times..
And to answer OP, TD gives you a personal non-secured LOC for anywhere between prime + 2 to prime + 5.

[st7860]

capital one has a mastercard with prime +2% with NO annual fee.

[Jacklad]

capital one has a mastercard with prime +2% with NO annual fee.

My Capital One is locked at 4.9% for life, so it's even better (and yes, better than my LOC rate). :cheesygri

Jackie

[ramoose]

its not that simple,you must factor in medium income,other taxable incomes and if you even make any profits from mutual funds.

I think I mentioned 12% profit from mutuals!
30% is the amount of tax used for this particular situation everyone may be different depending on how much they earn but then the $5000.that you use as a deduction gets treated at the same level of tax.
It is really that simple.