Author Topic: Should I take the credit line or not?  (Read 3038 times)

moustacheverte

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Should I take the credit line or not?
« on: July 11, 2015, 01:31:12 PM »
Hi Mustachians,

A while ago, I applied for a credit line. I didn't need it but I wanted it to replace my emergency fund so I could invest the 10k I keep lying around. I got approved for 10k @ 8.5% which is not that great (something like prime + 5% I think).

I didn't go through with it because the rate isn't great and I didn't feel like it was worth the hassle to go back to the bank and deal with it.

Fast forward, I lost my job but the bank is still pushing me to come and accept the CL.

I have no debt otherwise, 55k invested and getting employment insurance which covers my living expenses and then some.

What should I do? Take it just in case because I can't get a better rate (or a CL for that matter) anywhere else without a job? Or sit this one out and try to get a better rate later on? Since I already took the credit hit when I applied, will it matter whether I take it or leave it?

Catbert

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Re: Should I take the credit line or not?
« Reply #1 on: July 11, 2015, 02:57:08 PM »
At this point I would take it.  It'll probably be hard to get anyone else to lend to you while you're unemployed.

forummm

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Re: Should I take the credit line or not?
« Reply #2 on: July 11, 2015, 02:58:38 PM »
It sounds like your emergency happened--you lost your job--but you still don't need the loan. And it's a crazy high interest rate. Why would you want it?

Tjat

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Re: Should I take the credit line or not?
« Reply #3 on: July 11, 2015, 02:58:57 PM »
I don't see the downside of taking it. You don't have to draw on it, so i wouldnt consider it debt until you do. Can't hurt to have the extra funds available in case of a true emergency.

forummm

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Re: Should I take the credit line or not?
« Reply #4 on: July 11, 2015, 03:33:02 PM »
Some people will spend more if they have access to more. If that's your tendency, then I would lean towards not doing it. If it's just for another emergency that might come along, and it doesn't cost you anything to do it, and you absolutely won't increase your spending because it's there (spending either from LC or from existing funds), then it probably doesn't hurt to have it.

daverobev

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Re: Should I take the credit line or not?
« Reply #5 on: July 11, 2015, 06:48:15 PM »
Take it, don't use it. It's good for your utilisation stat.

Ask for a lower rate in a year.

Not sure which bank you're with, but some send out low interest promo cheques, some can be used as a chequing acct for free.

The Fake Cheap

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Re: Should I take the credit line or not?
« Reply #6 on: July 12, 2015, 06:24:34 PM »
Take it.  Seems like you wanted it at one point.  Unlikely you would get approved for another one at the moment now that you are unemployed.  You only pay interest on LOCs if you withdraw from it, and it seems like you were going to use this only as your emergency fund, so in a true emergency 8.5% isn't a bad deal.

Unsure if you are in Can or US, but in Canada your credit report will show you applied for the CL.  If you accept it, the balance owing and credit limit of the CL may be used for other credit related calculations in future loan applications. 

moustacheverte

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Re: Should I take the credit line or not?
« Reply #7 on: July 13, 2015, 07:49:08 AM »
Thank you for all your answer. I'm in Canada and I think my rate is so high because I'm churning credit cards on a regular basis. Never carry a balance and no debts aside from that but I guess that looks bad.

I wanted the LoC because I thought it was silly to have this 10k in cash lying around. So I wanted to invest it, draw from the LoC for emergencies and pay it back by selling investments.

I'll accept the LoC since as many have said there is no downside and it will lower my utilization ratios even further. I don't think it will make me spend more.

Retire-Canada

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Re: Should I take the credit line or not?
« Reply #8 on: July 13, 2015, 08:16:49 AM »
I just upgraded my LOC to $30K from $10K. They tried to charge me prime + ~3%
I complained bittery that I would shop around and get LOC from a different bank. They dropped my rate to prime + ~2%.

I would take it like others have suggested than complain that the rate is too high and you'd like it adjust down or you won't use it. Worst they can say is no.

moustacheverte

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Re: Should I take the credit line or not?
« Reply #9 on: July 13, 2015, 05:07:21 PM »
I already said the rate was too high and didn't accept it on the spot. They put a request to review the rate but it came back unchanged. That's why I didn't sign on this when I applied a while ago.

But I'll take it because it won't hurt and I can renegotiate later.