Line of Credit

Allows you to withdraw funds whenever you want (up to an agreed limit) without reapplying.

Westpac car loans

Westpac Flexi Loan

No fee for additional withdrawals, no early repayment fee and no exit fee.

14.99% p.a.
establishment fee
St George car loans

St George Get Set Loan

The Get Set personal loan is a convenient and reusable loan without an expiry date.

17.00% p.a.
establishment fee
BankSA Get Set loan

BankSA Get Set Loan

The Get Set personal loan is a convenient and reusable loan without an expiry date. It allows you to withdraw funds whenever you want (up to an agreed limit) without reapplying.

17.00% p.a.
establishment fee
BOM car loans

Bank of Melbourne Get Set Loan

Apply for a credit limit of $5,000–$50,000. You only pay interest on your outstanding balance and can make repayments above the monthly minimum amount without incurring early repayment fees or break costs.

17.00% p.a.
establishment fee

Dealing with your finances effectively means knowing what options are open to you, and understanding what will work best in your particular situation. When it comes to borrowing money or accessing credit, there are numerous options available, including lines of credit.

To help you work out whether a line of credit is right for you, let’s take a look at the ins and outs of lines of credit, comparing this option to the various other lending products out there. Then it’s simply a matter of using Credit World to compare the options – and find the best one for you!

What is a Line of Credit?

Sometimes described as a revolving account, a line of credit provides borrowers with access to an agreed-upon sum of money, which they can use for pretty much anything and access whenever they like. From home improvements to overseas vacations, a line of credit can make borrowing easier, especially when the amount required is not yet known.

When creating a line of credit agreement, lenders will set a total credit limit, with certain stipulations that the borrower must abide by. This might involve making certain minimum repayments, or it may simply require the total amount to be repaid by a certain date, with interest and fees repaid along the way.

When it comes to credit options, the line of credit is often popular, as the borrower only pays interest on the amount borrowed. So, even if the line of credit provides access to a total of $100,000, if just $20,000 has been withdrawn, the borrower will only pay interest on that amount.

A line of credit may be unsecured, with no form of collateral provided, or alternatively, it could be secured against the borrower’s home. This can be a popular option for homeowners, as it can provide them with access to credit at a lower rate of interest found elsewhere, by using equity in their home as security.

Lines of Credit vs. Personal Loans vs. Credit Cards

Before applying for any form of credit, it’s a good idea to find out as much as possible about the options available, to then compare them side-by-side.

  • With a line of credit, you may be able to borrow larger sums of money than if you were to apply for a personal loan or credit card – especially if that line of credit is secured against your home. This could allow you to take on bigger projects, or cover larger outgoings, as needed.

  • Just like a credit card, a line of credit allows you to only pay interest on the amount borrowed. While you may have a higher total credit limit, you will still only pay interest on the amount you have borrowed. With a personal loan, you will pay interest on the full amount borrowed, regardless of whether you use the total amount or not.

  • Again, similar to a credit card, a line of credit provides more flexibility than a personal loan. With a personal loan, you receive the full loan amount at once. With a line of credit, you can access the amount you need (up to the total credit limit), when – and if – you need it.

This flexibility also applies to repayments. With a personal loan, you will usually repay equal amounts on a regular schedule until the loan is paid off. With a line of credit, you may have minimum repayments to make, or you may simply be required to repay the total amount by a given date.

It’s worth bearing in mind that some borrowers may like this flexibility, while others may find it harder to repay their debt if they don’t have a regular repayment schedule to stick to.

  • Lastly, lines of credit can offer lower interest rates. Lines of credit – especially those secured by the borrower’s home – may attract lower rates of interest than personal loans or credit cards. Secured lines of credit may also be easier to get approved for, as they have collateral behind them.

Pros and Cons of Lines of Credit

Weighing up the advantages and disadvantages of the various types of loans out there can also help you to make the best decision.

Lines of Credit Pros

  • Flexibility to take out the amount you want, when you want it (up to the given credit limit).
  • The borrowed sum can be used for almost anything, including home renovations, which may increase the value of your home.
  • You only pay interest on the amount borrowed.
  • You aren’t tied down to a fixed repayment schedule.
  • You can secure the line of credit to the equity in your home, offering lower interest rates and making it easier to apply for.
  • A line of credit may provide a higher loan amount than those found in other lending products, such as a personal loan or credit card.

Lines of Credit Cons

  • Borrowers with poor financial discipline may find it hard to repay a line of credit with no set repayment schedule to stick to.
  • If the line of credit is secured by the borrower’s home, and the borrower fails to repay the amount borrowed, their equity or home may be at risk.
  • Lines of credit tied to home loans may attract higher interest rates on the home loan itself.

Tips: Getting Approved for Lines of Credit

As with any lending product, there are various ways borrowers can improve their chances of getting approved.

  • Understand the Product: Find out all there is to know about lines of credit, and compare options on offer from various lenders. Be sure to read the small print, and make sure you meet the lending criteria before you apply.

  • Check your Credit History: Applying for a copy of your credit report allows you to see exactly what potential lenders will see. Make sure you credit history is correct, and have any mistakes rectified.

  • Build your Credit Rating: If your credit report doesn’t look very appealing, you may want to spend time building up your credit rating before applying for more credit. Ensure bills and repayments are made on time, clear any debts you currently have, and show the lender you are able to save.

  • Make the Right Choice: Use Credit World to compare all your options – and only apply for the line of credit you think will suit you best. Making multiple applications may make you look desperate for credit, which could result in your application being rejected.

How to Best Deal with Lines of Credit

Successfully dealing with a line of credit means being smart with the money you borrow, while also making sure you don’t take out more than you can pay back. You may want to set up regular repayments, so you don’t get stuck with a large amount that you struggle to repay.

Always keep on top of the money you are taking out, and try to stick to the budget you set up when you made the application. Be especially careful if the line of credit is secured against your home, and keep lines of communication open with your lender if you feel you’re getting into trouble.

With that in mind, it’s time to compare the options! Check out Credit World to find lines of credit from a variety of providers, comparing features, fees and interest rates side-by-side. Easy!