If you need access to money for a big purchase or a project—such as a car, home renovation, or health care—there are many options available to you. It can be difficult to discern which options are best for you. In order to determine what will work for you, you need to fully understand your choices. Among the options available is opening a line of credit with a financial institution.
What is a Line of Credit?
According to Wikipedia, a line of credit is “any credit source extended to a government, business, or individual by a bank or other financial institution.” This line of credit becomes a source of funds which can be accessed by the borrower whenever it is needed. It can take a variety of forms, including on demand loans, a credit card account, and overdraft protection.
In addition to the on demand nature, part of the appeal in opening a line of credit is that interest is only paid on the amount of funds used. This can make it one of the more affordable options for individuals seeking a loan. Additionally, not all lending institutions will require that you secure the line of credit with collateral, making it easier to obtain than traditional mortgage loans.
Types of Credit Lines
There are two primary types of credit lines—business and personal. A personal line of credit is taken out by an individual. If collateral is needed to secure the line of credit, the individual’s personal property will be used. Business credit lines are taken out in the name of the company and the business’s assets are used to secure it.
Within these two primary types of credit lines are several subsets, including the home equity line of credit in Canada. This is the type which is of the greatest concern to home owners. The funds from this line of credit can be used to purchase, renovate, furnish, and decorate a home. Rather than getting a lump sum all at once, as with a traditional loan, the home owner can draw on the credit like he or she would with a credit card, making the process less overwhelming. Another type is the warehouse line of credit. This line or credit is opened by a loan originator to fund a mortgage, which is designed to eventually be sold.
Where to go to Open a Line of Credit
To open a line of credit in Canada, simply go to any financial lending institution to inquire about their process. Be certain to check their line of credit interest rates and shop around for the option that works best for you.
If you would like to have assistance in navigating the home buying process, contact iMortgage Solutions today at 403-870-2669 or visit MyMortgageBroker.com to learn more.