Personal Finance

CIBC approved Line of Credit Should I use it or not?

  • Last Updated:
  • Feb 9th, 2017 10:44 pm
[OP]
Newbie
Feb 8, 2017
4 posts

CIBC approved Line of Credit Should I use it or not?

Hello friends,

Recently, when I went to bank, they told me that I have been pre-approved "Line of Credit" for CAD10,000 with interest rate of 6.2% (2.7% prime and additional 3.5%). I have few queries, kindly help me.

1) Is it good rate interest for "Line of Credit"?
2) If I borrow money from "Line of Credit", will it affect my credit score?
3) I am planning to borrow around $6000(CAD) for my education loan and planning to repay the principal amount and interest in 3 years, that comes around $200 monthly. Is it a good idea or not? any suggestions are very welcomed.
4) Right now, I have only one credit card with credit limit of $6,500 (CAD). Currently, my debt/credit ratio is below 30%. If I borrow $6000(CAD) from "Line of Credit" will it affect my debt/credit ratio and lower my credit score?
2 replies
Deal Guru
User avatar
Aug 8, 2012
10198 posts
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BC
nalan2017 wrote: Hello friends,

Recently, when I went to bank, they told me that I have been pre-approved "Line of Credit" for CAD10,000 with interest rate of 6.2% (2.7% prime and additional 3.5%). I have few queries, kindly help me.

1) Is it good rate interest for "Line of Credit"?
It's not horrible. I wouldn't say it's "good" ... see: https://forums.redflagdeals.com/please- ... s-1834473/
nalan2017 wrote: 2) If I borrow money from "Line of Credit", will it affect my credit score?
Yes. Utilization is a portion of your score which measures how much you use your limits. If you get the LOC you will have a temporary hit to your score from the inquiriy, and then if you use it, you will see your score change depending on what % of your limit you use as well as how that factors into your total overall usage of all of your limits combined.
nalan2017 wrote: 3) I am planning to borrow around $6000(CAD) for my education loan and planning to repay the principal amount and interest in 3 years, that comes around $200 monthly. Is it a good idea or not? any suggestions are very welcomed.
nalan2017 wrote: 4) Right now, I have only one credit card with credit limit of $6,500 (CAD). Currently, my debt/credit ratio is below 30%. If I borrow $6000(CAD) from "Line of Credit" will it affect my debt/credit ratio and lower my credit score?
Yes. See answer to #2.

$6k / $10k = 60% utilization on the LOC trade line
$1k / $6.5k = 15% utilization on the CC trade line

$7k / $16.5k = 42% overall utilization.

If you can get a student loan or other loan for a good rate that may be a better way to go. You might still consider getting the LOC if you have the discipline to leave it untouched and only use in case of true emergency.
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Deal Addict
Dec 12, 2009
4682 posts
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Toronto
nalan2017 wrote: 3) I am planning to borrow around $6000(CAD) for my education loan and planning to repay the principal amount and interest in 3 years, that comes around $200 monthly.
Not sure if that means you plan to pay it off within 3 years or start paying it in 3 years.
If the latter, you will usually have to pay a minimum of interest + $10/ month or ~$40/month till you start paying down the principle.

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