Making the most of a PLOC?

[Sentry]

Hey I've just been offered a PLOC by my bank. I have a credit card with said bank that I use to pay for all my expenses big or small and pay it off every month.

Just wondering if there is an advantage to taking this line of credit? I live a financially conservative lifestyle so I likely wouldn't be using it much if at all. Would that help or hurt my credit?

My credit score is 795 as of last month when I last checked.

Just looking to optimize the situation I'll be in in a couple years when time comes to buy a home.

[Disoblige]

I been offered it many times and just declined it. At 6% (rate offered to me), I would never use it unless I was beyond desperate.

Although, I'd be interested to see what the effect of it on your credit is even if you never used it, but you accepted the LOC. Maybe Tim would know.

[guessboi]

Doesn't interest kicks in right away for any LOC once you use it?
I have never accepted a LOC.

[HiTempguy1]

Originally posted by guessboi
Doesn't interest kicks in right away for any LOC once you use it?
I have never accepted a LOC.

There is no minimum payment though.

So it makes sense if you want to purchase something and need to pay it off over time.

Some would argue that may or may not make sense. If you need funds for emergency car/house repairs, its way better than a credit card.

At the end of the day, 6% interest is also dirt cheap on a $10k vacation if you pay it off within a year or two :rofl:

[realazy]

Originally posted by guessboi
Doesn't interest kicks in right away for any LOC once you use it?
I have never accepted a LOC.

Yes, interest is charged when you withdraw from a LOC. If you don't withdraw from it, it just stays there with a balance of zero with no fees.

There's no harm to having a LOC open just in case you ever need it, as long as you're not the type to spend it because you see it.

[Mitsu3000gt]

Originally posted by HiTempguy1


There is no minimum payment though.

So it makes sense if you want to purchase something and need to pay it off over time.

Some would argue that may or may not make sense. If you need funds for emergency car/house repairs, its way better than a credit card.

At the end of the day, 6% interest is also dirt cheap on a $10k vacation if you pay it off within a year or two :rofl:

Every unsecured LoC I've seen or had has a minimum payment that is auto-debited out of your account every month, but it's pretty small.

The rates are so bad now though there is no real reason to get one unless you are in credit card trouble and would rather pay 6% than 18%. Other than that, IMO you are living too far beyond your means if you are getting an unsecured high rate LoC just to buy more stuff and not for an unforeseen expense/emergency.

Not a bad thing to have, but I wouldn't recommend anyone get it just so they can buy more stuff they want, which is tempting because banks hand them out like candy. It's nice to have if there is an emergency or unforseen expense, and if you're disciplined enough to pay it off quickly.

[Ntense_SpecV]

I used a PLOC for our basement development and with less than 4% interest...why not?

I just treated it like a car payment and have been diligently paying it off now for almost 2 years. I have roughly another 2 to go and it will be back to zero again.

Rates on them aren't as bad as people are making them out to be. You'd be surprised what your bank would do for you if you went in and talked with them.

[bjstare]

Definitely no harm in opening it if you think you might need it for emergencies.

On a related note, I find it amazing that people take on extra debt for "wants" like vacations and renos. I guess that's why household debt in Canada is so high these days. :nut:

[HiTempguy1]

Originally posted by cjblair

On a related note, I find it amazing that people take on extra debt for "wants" like vacations and renos. I guess that's why household debt in Canada is so high these days. :nut:

I don't know if I made it clear, but that was a joke on my own part. But I do know people who do it/have done it.

At 5% interest, I honestly don't see it as that big of a deal if paid off in a year or two.

[Xtrema]

I have one since 1995, never used it but also thought it would be great as an emergency fund before I have any equity.

Now it's pretty much useless as my funding hierarchy is Cash => HELOC => manufacturer loans => Mortgage => Unsecured LOC.

[ExtraSlow]

what's the "P" stand for?
Personal? As in, regular unsecured LOC?

If that's the case, I have one of those, and I use it a couple of times a year to manage cash flow. Always paid off within a month or so. if it's something longer term, I use the HELOC, but haven't had anything like that for a while.

[Cos]

.

[blownz]

Having either a secured or unsecured LOC is always a good idea as long as you use it responsibly.

But they are a great idea for emergency funds. Lets say you are laid off today and off work for 3 months. Hopefully you have some savings, but a LOC can help bridge the gap for a bit to keep you from having to charge everything to your credit cards and carry a high interest balance. And the bank will easily give you a LOC while you are working, but not so easy if you are laid off.

Most important thing though is to not abuse them and that is what the majority of people have difficulty with.

[sabad66]

I would get it and keep it around for emergencies. You can always cancel it later on down the road if it somehow negatively affects getting approved for a mortgage.

[TimLacroix]

Originally posted by Sentry


Would that help or hurt my credit?

My credit score is 795 as of last month when I last checked.



Hi Sentry, it is possible that your score will have a minimal hit once the account is setup, if you accept. In some cases, no additional credit checks are performed.

Even if one was done, you would see your credit score recover in months...

Do you need it? This depends on what you currently have. There are a number of factors so if you want to chat a little about your situation, I can give some additional info.

[tpurcell4]

^^
Good info!