The Basics of Line of Credit:

by | Jul 8, 2022

Interested in opening a line of credit in Canada? Don’t worry, we’ve got you covered. We take a look at what a line of credit is, how to apply for a line of credit and how you can get your financial account.  From small purchases to large-ticket items, a line of credit is an easy way to fund your purchases. And Yogi & Associates have helped thousands of Canadians get the credit they need. So, don’t hesitate to contact Yogi & Associates and find out what we can do for you and why you should consider opening a line of credit. Lines of credit are one of the most popular financial products that come with an entire range of other services and benefits. These lines of credit provide an easy way for people to access funds at any time to finance a variety of projects or personal expenses.

Newcomers to Mississauga may not know what a line of credit is, which means that they often overlook it as an option for financial needs. Having a line of credit gives you access to a larger credit limit and flexibility in using that credit. So, let’s read the article to understand what it really means.

What is a Line of Credit?

A credit line is a great way to cover your expenses or credit needs. It works like a regular loan when you need it. And you can borrow, repay and borrow again up to your credit limit without having to reapply. You are free to withdraw money when you need it most and use it for any purpose you choose!

Getting a LOC in Mississauga is easy and convenient. Just fill out a few forms and we’ll get you approved for an easy credit line that lets you borrow more money when you need it.

The basics of line of credit

Importance of a Line Of Credit:

A line of credit is essential in the life of small and medium-sized companies. It helps them provide the basic needs for their staff, keep up with the latest technology, maintain a qualified workforce, and so on. Moreover, it contributes to the company’s growth as it provides them with access to enough funds that can be used for different purposes and purposes. For example, if you live in Mississauga, the most common types of loans are loans against your home and personal lines of credit. Or if you need cash, whether you’re getting a new car or building furniture, your options include lines of credit. You can also borrow against your home equity if you own one, have equity in another property (like a second home or vacation property), or if you plan to use inheritance for maintenance on your current line of credit.

If you want to learn more about lines of credit like their types or advantages/disadvantages, you can look into one of our articles by clicking Functions of Line of Credits.

How Does a Line Of Credit Work?

A line of credit is an agreement between you, the borrower, and a bank, credit union, or other financial institution. The goal is to craft an acceptable interest rate and offer a flexible repayment schedule to make borrowing available to a range of people with diverse needs. The lender will determine your credit limit (knowing your income, and debts). If approved, you can access your available credit whenever you like by ATM, cheque, or online banking as long as your account is paid on time.

Here is a video of detailed explanation of how line of credit works.

Who Needs a Line Of Credits?

Many businesses operating in Mississauga need a line of credit for two simple reasons.

  1. First, many small businesses require an accessible line of credit to help fund their projects and operations.
  2. Second, when starting up, small business owners often need to borrow cash from friends and family before getting a bank loan which can be difficult.

Requirements to Get a Line Of Credit:

Financial institutions typically ask for a short set of papers when you apply.

These may consist of:

  1. Driver’s license or other official photo identification
  2. Employment verification

    There may be more factors, such as:

    1. Your earnings
    2. A credit rating
    3. Debt levels at the moment
    4. When examining your application, the lending institution will probably verify your credit report and score.

    How to Apply For a Line Of Credit?

    If you are new to Canada and don’t have a good credit history, you’ll need to build a financial position before you can apply for a line of credit. A line of credit is designed to increase your spending power, but you should pay it off as soon as possible.

    To apply for a line of credit, you’ll need to answer a few questions about your finances and the type of credit product you’re interested in. You can also call or visit a branch of your chosen bank or lender to apply.

    A credit report will determine how much you qualify for and how much interest you’ll pay based on several factors:

    • If you’d like to open a line of credit, you usually need at least a good credit score and adequate income.
    • Repayment capacity, which takes into account your steady income and the total amount of other debt you are currently carrying.
    • House price, which applies only to home equity lines of credit
    • The course of study or institution, for a student-only line of credit only.
    The basics of line of credit

    Interest Rate of LOC in Canada:

    Line of credit interest rates in Canada is usually variable, which means they rise and fall along with the prime rate. Right now, the prime rate is at 3.7 percent and may go up more as the Bank of Canada attempts to tackle post-pandemic inflation. Finding the best interest rate for your line of credit is easier said than done. There are a few things to keep in mind when you’re comparing the top rates:

    1. Canadian credit card interest rates fluctuate, changing along with the current prime rate. Presently, the prime rate is 3.7%, but it will likely go up as the Bank of Canada tries to manage post-pandemic inflation.
    2. Secondly, line of credit interest rates are also dependent on your credit score — the higher your score is, the better deal you may get. It’s also important to consider that if your line of credit balance goes up, pay interest on the full amount (just like on a loan). But if it falls below a certain minimum, the bank won’t charge any more interest.
    3. The third thing that you should consider about your line of credit is the interest rate. This will mainly depend on the financial institution you’re looking at. Online banks offer lower rates but can be hard to reach by phone or visit during business hours. If this is how you like to deal with people, stick with one of these big banks.
    the basics of line of credit

    FAQ’s

    Should we take a line of credit?

    That depends on your needs. With a line of credit, you have access to cash in advance of any planned expenses. Available terms include variable-rate loans, fixed-rate loans and fixed-term loans.

    What is the difference between a line of credit and a credit card?

    Line of credit and credit card are two different products with similar purposes, but have their own benefits and drawbacks. Depending on your personal needs, it may be better to choose either as your method of debt repayment.

    For how long does a line of credit last?

    You typically have a line of credit for 10 to 15 years following your initial draw period. During the draw period, you can use your line of credit as much as you need without any worry of running out of funds

    Which one is the easiest loan to take?

    Home equity loans are a great way to access the value of your home, or to repair and remodel it. We have a variety of loans to choose from, so you can get financed no matter what your credit history is.

    The Bottom Line!

    A line of credit may be the perfect solution for you if you have an emergency and need funds quickly. It’s like a bucket of loonies, where you can draw as quickly or as infrequently as you like, and pay interest only on the number of Loonies you have out at any given time. As a resident of Mississauga, you know that there are more ways than one to send money to family. With a line of credit products from Canadian banks, you can easily transfer money anywhere in the world with minimal fees. Contact Yogi & Associates today for more information!