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Don\’t Refinance Your Home, Get A Personal Line of Credit

Mostly all lenders are giving various options to home owners and real estate investors for real estate investment financing. Although, it is best for you to understand the available options and weigh out to see which one would save you more money. In our case, we will be discussing how a personal line of credit works and how it can be used to be an extremely great financing tool. This is a much less expensive and not a time consuming way to take out equity from your property for investing purposes. You should know: \’not all personal line of credits are equally balanced\’. A personal line of credit is just like a bank loan, but even better. Once a personal line of credit is approved you will have the benefit of taking out only a small amount of it, or a large amount. You can even write checks to pay for certain things. Now, the advantage in this is that, you only pay interest on the amount you take out, not on the whole loan. On the other hand, when you refinance, you pay interest on the whole amount. IE: Suppose you get approved for a $150,000 personal line of credit, and you take out $50,000. You will only pay interest on the $50,000 you take out. When refinancing you will be paying interest and principle from the beginning even for the money you don\’t use. This is a very smart way of taking equity out of your home. Personal line of credits are known to be very flexible and they can be paid off at anytime without a penalty.


An unsecured personal line of credit is much harder to obtain and it comes with various high expectations. It also has no collateral put up in the case of default. The interest rates are usually higher, sometimes 3% more than the prime rates. You will also need to pay principle and interest each and every month. The lender may not approve the line of credit because you do not qualify for certain things like income and credit score.

A secured personal line for credit always has a collateral in the backup, for example, it can be your home, your equity in the home or bond etc.. The interest rate is usually the prime rate for lending money. You will be paying only interest every month, not the principle. The interest rate will usually float around going up and down.


  1. Keep an eye on the interest rates, if you see that the rates are going to blow the roofs off, you should immediately contact a financial advisor and convert your personal line of credit to a fixed rate line of credit.
  2. Look out for deals mortgage brokers would like to offer you. They have a matrix-mortgage available which is really good for real estate investors, business owners and even home owners. Every time you pay principle on your mortgage, your line of credit increases.

Reader Feedback

4 Responses to “Don\’t Refinance Your Home, Get A Personal Line of Credit”

  • MaciceNo Gravatar says:

    Just bought a new home recently, will be thining about this in a few months

  • Mortgage2Nite says:

    Yes, you should probably save this article and come back to look at it.

  • yanjiarenNo Gravatar says:

    I thought only businesses could apply for a line of credit. I never knew this option was available to Individuals. Well it may be a little more expensive than the going rate but it must be cheaper than a credit card.

    yanjiaren’s last blog post..Newsflash: get 1,000 free shares before they all go!


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