Personal Finance

Should i open a LOC acccount?

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  • Aug 24th, 2006 1:56 pm
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Newbie
Jan 17, 2005
97 posts

Should i open a LOC acccount?

hey I need some financial advice...

my bank, CIBC, just offered me a $10,000 dollar line of credit.

The guy told me usually people need a credit check, income check, etc.. but told me I was preapproved.

I'm a student making about 10-15k/year...currently I am debt free, with 2 visa credit cards...

I don't have any real assets if that matters..

Does it make sense to take it out? It won't cost me anthing to use it, and it's 8% interest if I choose to use it..

Anything to ask/look for when i'm there?

Any advice would be helpful...pros and cons.. thanks in advance!
18 replies
Deal Fanatic
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Apr 6, 2003
8451 posts
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I'd probably do it, $10,000 is just about the perfect LOC in my opinion, enough to cover any emergencies or most anything big.

Long as you can avoid the temptation I would always suggest everyone has a LOC about that amount.

*shrug*

I don't think it would be a big deal if you took it now though or waited until you possibly needed it.
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Deal Addict
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Apr 2, 2006
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Just to note, being pre-approved doesn't mean much. Its just like those pre-approved credit card mailings you get.

10K LOC is pretty high for someone with your income. But if CIBC is going to give it to you.. I say go for it. Doesn't hurt.

But negotiate for a better rate. Lots of people are able to get prime + 1% for an unsecured LOC.
Banned
Jun 19, 2006
9349 posts
57 upvotes
As long as you can trust yourself not to abuse it, then having the LOC is an excellent idea which will help build your credit rating.

You can even do what many here already do, and that is, to perform all of your banking from the LOC, and not pay service charges on a chequing account.
Newbie
Aug 19, 2006
35 posts
4 upvotes
Toronto
But negotiate for a better rate. Lots of people are able to get prime + 1% for an unsecured LOC.
I am a student with a $18000 a year gross salary. I just got a LOC with the royalbank that is prime (6.000%) + 1/2%. So you should be able to get better than 8.0% :)
Deal Addict
Jul 18, 2005
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I was pre-approved for a $26,000 LOC with TD. I was 21, making roughly about $12000/yr with a p/t job. I took it b/c it was like standby money. The rate was prime+3.5%, and I was able to go in and negotiate it to prime+2%.

Later on, when I get a f/t job paying over $42,000 (next year), I'll shop around for another LOC with a better rate.

If I were you, I'd take the LOC as an "emergency fund".
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Apr 2, 2006
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AndrewCarrothers wrote:I am a student with a $18000 a year gross salary. I just got a LOC with the royalbank that is prime (6.000%) + 1/2%. So you should be able to get better than 8.0% :)
mind telling me what bank you're with? RBC is whining that prime + 1 is the best they can give (employee rate they say)

and also, I'm still really surprised that people are able to get a LOC that are above and beyond what they may make in a year...
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Apr 29, 2002
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Mississauga
circa76 wrote:mind telling me what bank you're with? RBC is whining that prime + 1 is the best they can give (employee rate they say)

and also, I'm still really surprised that people are able to get a LOC that are above and beyond what they may make in a year...
Good credit? High annualized salaries? I know people that are still students who have annualized jobs making 45-55K/year... this is before graduation. (I have no idea, just offering suggestions)

Again, shouldn't you only open accounts when you need them? or is this a type of situation where if you need it, it's not available?
Deal Addict
Jul 21, 2004
1426 posts
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circa76 wrote:mind telling me what bank you're with? RBC is whining that prime + 1 is the best they can give (employee rate they say)

and also, I'm still really surprised that people are able to get a LOC that are above and beyond what they may make in a year...
Well, many banks look at your future earning potential when you are a student. So if you are a medical, law, accounting students, they will likely give you a high LOC if you ask for one. As for the rate that you get, you have to negotiate, I got mine at prime with RBC 3 years ago.
Deal Addict
May 9, 2004
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Upstairs
koft wrote:Well, many banks look at your future earning potential when you are a student. So if you are a medical, law, accounting students, they will likely give you a high LOC if you ask for one. As for the rate that you get, you have to negotiate, I got mine at prime with RBC 3 years ago.
Prime? Is that for an unsecured line of credit?
They (RBC) told me only secured LOC are at prime.
Deal Fanatic
Feb 1, 2006
9645 posts
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Muskoka
I still don't get how people are able to get such low rate unsecured LOC's with major banks. I've been with TD forever, I have perfect credit, good income, lots of assets, yet they won't go lower than prime plus 2.75%! I've went in and talked about it with them, they tell me no one gets prime plus one rates with TD. Which appears to be not true from all the posts I see here.

The result is that I have an LOC with them, but I just use it as my bank account, I don't carry balances on it. I just wanted the lower rate for short term financing of things, but I won't at that rate.
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Dec 24, 2004
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Bullseye wrote:I still don't get how people are able to get such low rate unsecured LOC's with major banks. I've been with TD forever, I have perfect credit,.
You say you have perfect credit, which may be true, but maybe there are personal factors. For example, do you spend up to your credit limit every month then pay it off all at once the next month. depending on the date each month your specific credit provider reports to the bureau, that CAN sometimes decrease your credit score due to a HIGH BALANCE.
Sr. Member
Sep 14, 2003
977 posts
2 upvotes
j5kang wrote:hey I need some financial advice...

Does it make sense to take it out? It won't cost me anthing to use it, and it's 8% interest if I choose to use it..

Any advice would be helpful...pros and cons.. thanks in advance!
The one thing that has stuck with me through all my business schooling.

"Borrow money when you DON'T need it because no one is going to lend you money when you really need it."
Deal Fanatic
Feb 1, 2006
9645 posts
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Muskoka
st7860 wrote:You say you have perfect credit, which may be true, but maybe there are personal factors. For example, do you spend up to your credit limit every month then pay it off all at once the next month. depending on the date each month your specific credit provider reports to the bureau, that CAN sometimes decrease your credit score due to a HIGH BALANCE.
Yeah, maybe that's it. Can't understand how, otherwise...
Deal Fanatic
Feb 1, 2006
9645 posts
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Muskoka
bembem wrote:The one thing that has stuck with me through all my business schooling.

"Borrow money when you DON'T need it because no one is going to lend you money when you really need it."
Yep, to get a loan, you generally have to prove that you don't actually need it. :lol:
Newbie
Jan 17, 2005
97 posts
good advice.

thanks all!

i will go in and talk to my bank today.

cheers
Deal Addict
Dec 3, 2003
1712 posts
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Toronto
Bullseye wrote:Yep, to get a loan, you generally have to prove that you don't actually need it. :lol:
That is another way of stating it which is false. I saw the smiley though. ;)
Let's stick to the facts and the real meaning: You will get a loan if the lender feels you have the capacity to take upon debt.
Deal Addict
Jul 21, 2004
1426 posts
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RedBargainz wrote:Prime? Is that for an unsecured line of credit?
They (RBC) told me only secured LOC are at prime.
it was Unsecured... professional student (ie Med/Dent/Law)
Deal Addict
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Apr 2, 2006
1023 posts
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Bullseye wrote:I still don't get how people are able to get such low rate unsecured LOC's with major banks. I've been with TD forever, I have perfect credit, good income, lots of assets, yet they won't go lower than prime plus 2.75%! I've went in and talked about it with them, they tell me no one gets prime plus one rates with TD. Which appears to be not true from all the posts I see here.

The result is that I have an LOC with them, but I just use it as my bank account, I don't carry balances on it. I just wanted the lower rate for short term financing of things, but I won't at that rate.
Even for me I think the only reason I got prime + 1% was because I became friends with my banking officer/advisor or whatever they call themselves these days. But then she went off and took another job within RBC so I don't know who's managing my account now. :( Regardless, I haven't been able to get lower than prime + 1 on an unsecured LOC despite having an R1 credit rating and not using anywhere near my limit.

I agree, if you are taking law or medicine or something the banks will be more inclined to loan you more. My "annualized" salary while I was in uni was about 50K. Actually I was making close to that since I was working all the time. Even with that I only got $10,000 at the time at prime + 3%.

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