What is a line of credit? It can simply be defined as any economic product in which the length of time in which the debt needs to be resolved is not stipulated. We will now briefly examine the three principal categories and their differences.
When it comes to lines of credit, there is generally no stipulated minimum monthly fee. This makes rapid payment of the principal easier.
Perhaps the most common and versatile category of a line of credit is a credit card. The disadvantage of a credit card is the high interest rate involved. The advantages, however, are that they can be used for any financial need and often offer incentives, unlike the other kinds of lines of credit.
Rewards can include points to a particular company's products, cash back, plane tickets, or new cars in the case of GMC for these different types of cards. Interest-rate on credit cards will be higher with the other two types of lines of credit and credit cards are not put in a good light due to the balances many people keep on them.
Another category of a line of credit, which offers the ability to spend much more at a lower percentage of interest, is a signature line of credit. They are frequently used only in the case of a crisis or in order to combat the high percentage of interest one has on his credit cards.
The last category, and the line of credit with the lowest percentage of interest, is a home equity line of credit. Such a line of credit is secured with collateral, in this case with your home. If you are unable to make the payments you have agreed upon, the bank has the right to seize your home.
You will likely find that one of the advantages of the latter form of a line of credit is the tax advantage.
If you are considering taking out a line of credit, it is important to investigate the three categories that were just mentioned and their uses. This will help you to make a wise choice. Remember, you may have several lines of credit at once.
When it comes to lines of credit, there is generally no stipulated minimum monthly fee. This makes rapid payment of the principal easier.
Perhaps the most common and versatile category of a line of credit is a credit card. The disadvantage of a credit card is the high interest rate involved. The advantages, however, are that they can be used for any financial need and often offer incentives, unlike the other kinds of lines of credit.
Rewards can include points to a particular company's products, cash back, plane tickets, or new cars in the case of GMC for these different types of cards. Interest-rate on credit cards will be higher with the other two types of lines of credit and credit cards are not put in a good light due to the balances many people keep on them.
Another category of a line of credit, which offers the ability to spend much more at a lower percentage of interest, is a signature line of credit. They are frequently used only in the case of a crisis or in order to combat the high percentage of interest one has on his credit cards.
The last category, and the line of credit with the lowest percentage of interest, is a home equity line of credit. Such a line of credit is secured with collateral, in this case with your home. If you are unable to make the payments you have agreed upon, the bank has the right to seize your home.
You will likely find that one of the advantages of the latter form of a line of credit is the tax advantage.
If you are considering taking out a line of credit, it is important to investigate the three categories that were just mentioned and their uses. This will help you to make a wise choice. Remember, you may have several lines of credit at once.
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Is secured debt consolidation a good choice for getting your debt paid off? Find out more about how it works and whether or not it's a good choice at the Debt Smackdown website.
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