Tips on How to Use a Line of Credit – MCAP
Saving for a rainy day is a good idea. Setting aside a slush fund of money can help offset the expenses of an emergency.
If you own a home, a line of credit is another great financial safety net to have. Used responsibly, a line of credit lets you tap into the equity you have built up in your home for what you need, when you need it.
Having a line of credit goes a long way in providing accessibility to funds that can help you underwrite unexpected purchases such as a roof repair, finance projects such as a renovation, or leverage an investment.
At a better interest rate than credit cards, a line of credit makes good sense. However, using a line of credit also requires good financial habits.
Here are three tips on how to make a line of credit work for you responsibly:
Exercise discipline: While tempting, avoid dipping into a line of credit for everyday purchases such as household expenses and dinners out.
Using the fund as an ATM will quickly rack up debt and eliminate the cushion of having a reserve available for an emergency or a major purchase.
Make regular payments: Set a realistic payment plan and timeline to pay off the line of credit principal and interest.
Making more than just the minimum payment will help retire the debt faster, freeing up the funds for re-borrowing when you need them.
Use money to make money: A line of credit is an excellent financing tool that can create wealth by increasing the worth of your home through renovations or topping up an RRSP contribution. Use your tax return to repay the investment dollars borrowed.
Visit www.mcap.com to learn about the benefits of MCAP’s Home Account and Home Account Plus lines of credit.