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 . 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 . 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.

[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