I searched and did not find anything about this subject. I wonder what others opinions are on unsecured lines of credit. These include GE Money, Bank of America Gold Line of Credit, CreditOne, etc. These are lines with fixed payback periods and fixed interest rates (unless you screw up). They typically come with checks, so they are easier to access then credit cards, but usually include a 3% fee.
I have a couple set up as emergency funds, because I can just right a check to take care of whatever the issues is.
What is the community feel on these products? Also, how do they effect your credit? Are they treated as "better" credit due to the term put on the loan or as the "worse" revolving type? Any comments are appreciated. Thanks!
The APR is going to be terrible becuase it is not secured (mortgage, car, or margin loan, for example) or subsidized (Stafford). Any high APR debt is bad IMHO. To make matters worse, generally it is not going to be tax deductible either.
Beavisthecat
Member
posted: Aug. 24, 2007 @ 8:06p
They usually say that the rates start at 7.99%. The one my wife has is actually 10.99. This is great, but its not all bad either. Especially, if you use it as a short term hard money loan.
If it provides a lump sum upfront, with fixed rates and repayment its probably not a line of credit, its a personal loan.
LINES allow paydown/ redraw of funds up to the "credit line".
There are discussions in the archives. The rates on these are so high it makes little sense to use them when you can just easily get lines of comparable size with low rate for life or 0% CC funds.
LustfortheMoment
Senior Member - 1K
posted: Aug. 24, 2007 @ 8:26p
Beavis, it's a no-brainer. The rates on these unsecured loans will ALWAYS be higher than the best HELOC rates which generally are Prime minus 1%. Such lines are not tax-deductible, and many come with access fees as you stated. What's to like????
Beavisthecat said: They usually say that the rates start at 7.99%. The one my wife has is actually 10.99. This is great, but its not all bad either. Especially, if you use it as a short term hard money loan.8% + 3% is effectively an 11% APR for the first year. It is even higher if you repay it more quickly. That is an expensive loan!
LustfortheMoment said: Beavis, it's a no-brainer. The rates on these unsecured loans will ALWAYS be higher than the best HELOC rates which generally are Prime minus 1%. Such lines are not tax-deductible, and many come with access fees as you stated. What's to like????
I agree that the rates/terms usually suck, but the interest may be deductible as investment interest, depending on use of the loan proceeds.
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