The Learning Centre:
Know the difference: secured vs. unsecured lines of credit
You save for what you need. You’ve got an emergency fund…
But then something totally unexpected happens – you have an accident driving to school and the car’s totalled. Or you finally took that 4 over 5 and your expenses are higher than you thought they’d be. Everyone needs extra funds sometime. What’s important is to understand the differences between the types of credit or loans available, and manage the credit you have responsibly.
For many people, a line of credit (LOC) makes a source of emergency funds.
A line of credit (also known as ‘revolving’ credit) is an arranged amount of standing credit that’s available for you to use at any time, provided you do not exceed the limit allowed. There are two types of lines of credit: secured and unsecured.
You can continuously borrow and repay up to your pre-determined limit.
How does a line of credit stack up against a loan?
Compared to a loan, a line of credit has several advantages. One of the biggest is that, with a line of credit, you only pay interest on the money you actually use. So if you have a $50,000 line of credit and use $5,000, you’re only charged interest on the $5,000. It’s one of the reasons why a line of credit is ideal as a source of emergency funds.
Another advantage? A line of credit is reusable. You apply just one time, and once approved, you can access any amount of the credit line at any time. Finally, the rate of interest on a line of credit is usually lower than a credit card. You can check out the walloping difference in the interest you pay on credit cards, loans, and a line of credit through Educators Financial Group on this page.
An unsecured line of credit – great for consolidating high interest loans
With no fees to set up, and a maximum borrowing amount of $50,000, the unsecured option is ideal for lower priced needs, and perfect for those looking to consolidate multiple high-interest credit cards/loans into one, low-interest option.
Need a greater amount of credit? Consider a Secured/Home Equity Line of Credit.
A secured line of credit, backed by the equity in your house, lowers the risk to the lender, so you get a lower interest rate, lower monthly payments and a significantly higher limit. In fact, if you plan to use a significant amount of credit you can save hundreds a year with a secured line of credit.
The chart below sums up the differences between an unsecured and secured line of credit available through Educators Financial Group:
|Benefits||Get access to credit, when you need it||Lower interest rate on credit|
|Ongoing access to funds for everyday purchases||Ongoing access to funds for larger purchases, debt consolidation, and home renovation|
|Lending range||Maximum $50,000||The highest credit limit available to you (up to 80% of the value of your home)|
|Rate||Variable, higher than a secured line of credit||Variable, lower than an unsecured line of credit|
Educators Financial Group has some of the lowest rates on lines of credit around…and they’re only available to education members!
Educators offers exclusive low rates to members of the education community and their members.
At Educators, we have agent – regional directors who have the answers to all your borrowing questions, and who can help you decide the best way for you to get the money you need. Why not sit down with them today? Or, if you prefer, complete the application form.