Line of credit advice?

[calgaryblood]

Hi guys, I am wondering if anyone here has experience in line of credits and which banks offer the best rates?

My credit rating is currently in the 720's so fairly good I think. I got a rate of prime plus 5% so 7.7% unsecured and this is the first time ever getting a loan or anything like that so I am not sure if that's good or not.

I got a better rate for a loan at 6.7% but not really sure which one is better in the long run.

Can anyone offer any good advice? Would be deeply appreciated.

[malcolmk14]

I'd also be curious to hear responses to this thread. My student line of credit is prime + 1.5 which I think is pretty good, but if there's a better option out there I would love to hear about it!

[Amethyst]

In addition to the interest rate, you also need to look at payment options. The lower interest rate may have penalties for paying more than the required payment each month, so if you want to pay it off early, it may not be the best option.

[GullFoss]

i started with prime+5% in 2009. I now have prime + 2%. I tried to get it down further, but they wouldn't budget. My strategy was to make a branch apointment every year and ask for a reduction of 0.5-1.5%. Its adds up over time.

Also when I go in, I try and make sure I have a balance on it, but not one that would be difficult to pay off. I would say something like "well...i do like having it and i do use it...but I don't really need it. That said, I want one, and I also like to do all my banking at the same place...so if we could improve it, I'd really like to..."

[Canehdianman]

Mine is prime+3. Haven't really thought about trying to lower the rate since the balance is at zero.

[V]

Mine with BMO is prime + 2.41%. I've tried to reduce it, but it's as low as they'll go with me. Oh well, that's still a pretty solid rate for unsecured.

[fundmark19]

Check out Mogo.ca apparently they are changing the lending strategy and are very competitive website says from 5.9 percent. I haven't used them personally though

[Pizza]

if you guys have at least 20% equity in your home, get a secured line of credit. The interest is way better than an unsecured as it's prime +0.5% or 1%

just dont default on it

[vanisleflamesfan]

My advice is, if you think you can beat 7.7... become a day-trader. Get every cent you can and pour it into the stock market while always trying to beat the 7.7 mark. I'm sure you can do it.

[Deegee]

As someone who works in retail lending, the majority of the populace is not like the 1% on CP and do carry a balance on their Line of Credit.

It seems that people can budget to make a payment, but if left up to their own decision as to how much to pay, people will pay the interest only and move on.

Lines of Credit work for very few people. If you are getting a better rate on an unsecured loan that might be a better option. Honestly, if you can't afford the loan payment maybe you shouldn't be borrowing the money right now.

Originally Posted by Pizza

if you guys have at least 20% equity in your home, get a secured line of credit. The interest is way better than an unsecured as it's prime +0.5% or 1%

just dont default on it

Most places will provide 65% LTV on a Line of Credit secured by your property. Federal regulation changes mandated this. For example, if you want to finance a purchase with 80% borrowing and want it all in a Line of Credit, you will be told no and 65% will be revolving and 15% will be reducing in nature at most places. I know some Credit Unions will still do 75%-80% (I know we do 75%).

[brocoli]

As another person who works in retail lending, I will say that especially with any unsecured lending (so lines of credit or loans), we have room on interest rates to negotiate.

Now obviously there must be just cause, but there is always room. The only place that I personally struggle to get some rate adjustment is when it comes to mortgages. However, as it's stated above, the rate is only half of the loan. Also look at the payment schedule and see that it fits within your budget. Especially if the Line of Credit is maxed out.

Always plan for the worst case scenario and you are golden moving forward. PM me if you have any other questions or need some more advice

[V]

I initially used my unsecured line of credit to invest some money. Now I have an investment account, and my line of credit is empty. Of course, now I'm about to take another 40k out of my LOC to pay directly on my mortgage to bring it under the 80% mark for my renewal in September. If I can save on all of those CMHC fees I will be paying far less in differential interest (LOC at 5.4%, mortgage at 2.5%) than I would be in fees.

I also find the LOC useful because I make 1/3 of my income in one month, so the LOC can be nice to tide me over until the lump sum payment comes in.

[fundmark19]

Originally Posted by V

I initially used my unsecured line of credit to invest some money. Now I have an investment account, and my line of credit is empty. Of course, now I'm about to take another 40k out of my LOC to pay directly on my mortgage to bring it under the 80% mark for my renewal in September. If I can save on all of those CMHC fees I will be paying far less in differential interest (LOC at 5.4%, mortgage at 2.5%) than I would be in fees.

I also find the LOC useful because I make 1/3 of my income in one month, so the LOC can be nice to tide me over until the lump sum payment comes in.

You don't have to pay CMHC fees again when you renew a mortgage. You pay them once per property. If you refinance that house you pay the difference between what you paid before and the new value.

[V]

Huh, I had no idea. That's awesome news, thanks.

[fundmark19]

Originally Posted by V

Huh, I had no idea. That's awesome news, thanks.

No problem! Here is a link! Doesn't do the best job explaining but check it out!

http://www.cmhc-schl.gc.ca/en/hoficl..._Refinance.pdf

[MillerTime GFG]

Originally Posted by fundmark19

You don't have to pay CMHC fees again when you renew a mortgage. You pay them once per property. If you refinance that house you pay the difference between what you paid before and the new value.

Not sure if I'm misinterpreting what you're saying, but there are no CMHC fees on a refinance either. You can only refinance up to 80% LTV (unless you use a private lender for a 2nd mortgage behind), so you're still in a conventional mortgage and do not need to pay the premium.

If you port your mortgage (take it from one property to another), your CMHC/Genworth/CG insurance is generally portable as well, meaning you would not have to pay a brand new premium on your new purchase. If you need new money (which most do because people generally trade up), then you would have to just pay a top-up premium on the difference between the mortgage amount requested and the mortgage amount you ported over.

EDIT: Lenders will back-end insure their mortgages, but is paid by them, not you.

[fundmark19]

Yes! I was way off my apologies I was mixing up my two transactions I am doing right now with my refinance and with my porting old home mortgage to new one.

[pylon]

That sounds pretty weak.

My HELOC is 3.2%.

My Unsecured Line is 5.59%.

And I am through RBC. I score just over 800, but anything over 700, shouldn't make a difference, and still get you in the primo rates.

However, your Transunion score will be higher than your Equifax score in most cases. I believe RBC and Scotia are the only big banks the go primarily to Transunion. I know RBC does for sure. I heard Scotia is switching over, or already has.

[calgaryblood]

Originally Posted by pylon

That sounds pretty weak.

My HELOC is 3.25%.

My Unsecured Line is 5.25%.

And I am through RBC. I score just over 800, but anything over 700, shouldn't make a difference, and still get you in the primo rates.

However, your Transunion score will be higher than your Equifax score in most cases. I believe RBC and Scotia are the only big banks the go primarily to Transunion. I know RBC does for sure. I heard Scotia is switching over, or already has.

Thanks for the reply. Did you have to negotiate the rate or was it just given to you because of your good credit?

[pylon]

Originally Posted by calgaryblood

Thanks for the reply. Did you have to negotiate the rate or was it just given to you because of your good credit?

I guess I should Caveat this.

I do dealer lending for a living, and RBC knows this when they look at my profile, so they usually just drop their pants and give me the best rate they have available. Because they know I will always have a 'connection' to get a good rate.

However, there is one thing I have always heard about RBC, and it is true. Once they have your mortgage, they basically hand you the keys to the vault. I went in to pay my Visa last November, and at the time I was looking at a Ducati. I just poked my head in one of their offices, and said. "Hey, I'm thinking about buying a new bike... what's your rate right now if I just set it up through you guys. I kinda don't want to put in on my HELOC" He sits me down "Oh, I see you have your mortgage and Visa card here... just give me a second." On a soft inquiry, they offer me a $50,000 unsecured LOC and ask me if I want to bump my Visa limit to $20,000. I said yes to the LOC, but no to the Visa bump lol. Nobody that doesn't own a big business, needs more than a 10k limit on a single card IMHO.

I frikkin work in lending, and I was taken aback. It's not like I am super rich or anything. But they are very aggressive with their own clients as long as you stay up to date with them. I love First Calgary to death with my day to day stuff, but RBC is extremely generous and easy to deal with for loans/lines of credit.

At the time I scored around 735, but the limit bumps, pushed me up over 800. So it was definitely a win win. I am also 40, and have a pretty small Mortgage balance as well. So yeah, sometimes you have to 'earn' the lower rate, but it never hurts to ask.