Hi everybody
With a line of credit do you have to make
set repayments?
I am confused.
Can i assume that with some lenders you can
capitalise and with others you have to make
set repayments?Correct. Some lenders will allow capitalisation of interest (subject to the approved credit limit). Others will require minimum repayment of interest only.
Cheers
Stu
Thanks Stu.
How does a line of credit work exactly for example LOC $50,000 at 7% draw out $10,000 leaves you with $40,000. But you owe $10,000 .
A. Do repayments come out monthly on the $10,000 at %7.
B. If you put in $1000 back are you only charged for $9000.
?
C. Does that $1000 offsets the repayment for the period in the loan?D.Can the LOC loan be fixed at a rate?
E.Would it be better to take out a LOC with your own home or an Ip? (Tax Reasons)
F.Is it better to have a LOC or a Visa/Mastercard?
g.And has anyone done it and what are your experiences with LOC good or bad?
I apologise for all the questions but i cannot see to many answers on this subject on the forum or i must be looking in the wrong place.
Thanks Dom[biggrin]
Hi Daaj,
A. Do repayments come out monthly on the $10,000 at %7.
B. If you put in $1000 back are you only charged for $9000?Repayments are calculated daily on the amount outstanding – which in your example is $10K and then reduces to $9K as per point B.
C. Does that $1000 offsets the repayment for the period in the loan?
If you wanted to, pay the interest bill of ~$58, and the balance remaining $942 comes off the principle.
D.Can the LOC loan be fixed at a rate?
My LOC is variable – see no reason why you couldn’t fix – fixing LOC is not on my horizon at the moment.E.Would it be better to take out a LOC with your own home or an Ip? (Tax Reasons)
Makes no difference as the purpose and use of the
LOC funds determines whether or not the interest is tax deductible.F.Is it better to have a LOC or a ‘card?’
LOC interest rate is cheaper – although both are considered fully drawn when banks look at serviceability. LOC is secured against assets and ‘card’ is unsecured.g.And has anyone done it and what are your experiences with LOC good or bad?
Works well for us – do not use LOC for personal and investment expenditure – your accoutant will hate you forever.Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Thanks Derek,
Great information and thanks, now i just have to work out if its the best thing to do for my situation.One last question do you inccur any costs if you cancel the LOC?
Cheers Dom[biggrin]Hi Daaj,
Only in accordance with any loan conditions but the question has got to be Why cancel it?
It is a little gold mine for your future investments and will only cost (after establishment costs) you interest based on what is drawn.
Nothing drawn out = $0 interest (maybe account fees depedning on your loan). For me having access to those funds at call is worth carrying any cost for.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Derek,
I have no reason to cancel it but good to know,and i think you still have to be carefull if your not good with money as your little goldmine may run out of gold.LOLDOM[biggrin]
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