What is a line of credit and how does it work?
A line of credit is a type of finance which has a few unique features. With lines of credit the primary benefit is the ability to transact in and out of the facility – much like a bank account. This type of facility was traditionally seen as popular with investment and business lending due to the flexibility of the product which allowed sophisticated investment strategies to be implemented with relative ease.
Line of credits however have declined in favour with both lenders and customers – as the widespread implementation of offset accounts has meant that the same flexibility can be achieved, whilst allowing a greater number of product options. Likewise there are considerable taxation implications which need to be considered when using a line of credit.
With the changes to lending policies which have come through over the years, line of credit loans are either being withdrawn from lender offerings or increasing significantly in cost, making them fall further out of favour compared to most lenders package product offers.
Do you have an existing line of credit and want to know whether it’s still right for you, or needing a new loan and unsure whether a line of credit fits your needs? Call our finance experts and we can explain your options available.