topic Re: How do you use LOC? in Personal Finance

How do you use LOC?

Anonymous — Thu, 26 Jan 2017 16:22:14 GMT

Is it just a standing 5-9-14% loan that is paid off until you use it?

So any time you have a credit card that is about to carry to the next month and the interest rate is higher you pull out out of the line of credit to your checking account and pay the outside credit card, then pay back loc? Are there installment payments, or are payback terms just a min payment like a revolver?

I've never had a loc.

Re: How do you use LOC?

enjoimorenow — Thu, 26 Jan 2017 17:22:01 GMT

yes, it's essentially a loan at a set interest rate, so it would be "smarter" to use if the apr is lower than the credit card you used, but you should try to never carry a balance anyways.

LOC typically starts accruing interest right away, whereas a credit card could be delayed close to 2 months based on when you made the purchase and when your due date would be.

payments are different for each bank, but for example NFCU charges $20 or 2% of balance, whichever is higher...

Re: How do you use LOC?

Anonymous — Thu, 26 Jan 2017 23:54:19 GMT

@Anonymous wrote:
Is it just a standing 5-9-14% loan that is paid off until you use it?

So any time you have a credit card that is about to carry to the next month and the interest rate is higher you pull out out of the line of credit to your checking account and pay the outside credit card, then pay back loc? Are there installment payments, or are payback terms just a min payment like a revolver?

I've never had a loc.

Pretty much (a loan sitting around until you use it). There are different kinds of LOC's, there are Checking LInes of Credit or CLOC which, for most banks/credit unions only let you (or prefer you only use it for) overdraft protection; Personal Line of Credit or PLOC is essentially like a credit card without the card. It can hang out there by itself (like how PenFed has theirs) that you access by transferring funds to your checking account, write a check from the PLOC or get cash from an ATM or to make things confusing, a PLOC can also be used as overdraft. For instance, my PLOC from Security Service FCU is technically a PLOC, but it is attached to my checking account so it acts as overdraft but can also be access by my checking account via check, Debit MasterCard or online transfer. My bank only has CLOC and I can only access it if I am overdrawn. The final LOC is the Home Equity Line Of Credit or HELOC. Essentially the same thing as a PLOC only your house acts as collateral and therefore you get a lower APR and possibly can get a tax deduction.

LOC's (except for HELOCs) are not as popular in the US as we have credit cards with lower rates than most LOC's. Why use a PLOC at say, 14% when your credit card offers 9% plus a grace period. Most LOC's do not have grace periods which means you pay interest on the amount you borrow the first day you take the loan from the LOC.

In Canada, PLOC's are much more common and have unsecured APR's of 3-4% and this makes sense as most Canadian credit cards have annual fees and have APR's near or above 18% even with excellent credit. So its like the reverse of the US.

I like having a LOC for overdraft purposes. I don't make a habit of being overdrawn and havn't for years, but my CLOC at the bank saved my behind a few times when I wasn't paying attention to my checking balance. My SSFCU PLOC has a low rate of 6.25% which is one of the best in the country, so it is nice to have that to draw on short term when I need to pay for something.

A lot of people here rave about the NFCU CLOC but they probably never use it, they just like the $15K of padding to their available credit for favourable debt to credit ratios.

Re: How do you use LOC?

oldman425 — Mon, 30 Jan 2017 23:29:09 GMT

Every couple of weeks I write myself a check for $50 or $100 then I pay it back a week or so later.

Re: How do you use LOC?

Appleman — Thu, 02 Feb 2017 14:49:53 GMT

PLOC is a nice backup product. If you get stuck and need a ~~large~~ (large will vary by person's need/income) cash infusion this may be your best bet.

Mistimed your 0% offer on the Home Depot card, pay it off with a PLOC before you get hit with the retroactive interest.

There are other options, but this is one way someone might use a PLOC.

Re: How do you use LOC?

Anonymous — Wed, 08 Feb 2017 03:05:50 GMT

I use mine as a backup. It's set up essentially as the overdraft on my checking account. If I have a payment come out without sufficient balance it draws from the PLOC and I pay interest immediately until I repay.

It's saved me twice. Once when I screwed up the math balancing my account as was a few dollars short and once where I got the timing of a transfer wrong as incoming funds came a day late.

Both times I carried a balance for only a couple days and paid a very small amount of interest on the LOC. If I didn't have it I would either have a bounced payment and NSF fees or a large overdraft.

I view it as a safety net and not a borrowing strategy.

Re: How do you use LOC?

Anonymous — Sun, 12 Feb 2017 12:51:22 GMT

is their a requirement for the CLOC or PLOC to actually have a checking account?

Re: How do you use LOC?

Anonymous — Sun, 12 Feb 2017 20:50:30 GMT

@Anonymous wrote:
is their a requirement for the CLOC or PLOC to actually have a checking account?

I only have savings accounts for both of my lines of credit. That is PenFed and NFCU.

Re: How do you use LOC?

AverageJoesCredit — Sun, 12 Feb 2017 21:36:58 GMT

So a Cloc from Navy federal would be more for show than use? Ive noticed you say most banks / cu's would prefer you not use it. I just see alot of people here raving and trying to get the cloc from Navy Fed. Always wondered point of these ploc and clocs.

Re: How do you use LOC?

Anonymous — Mon, 13 Feb 2017 22:40:27 GMT

@AverageJoesCredit wrote:
So a Cloc from Navy federal would be more for show than use? Ive noticed you say most banks / cu's would prefer you not use it. I just see alot of people here raving and trying to get the cloc from Navy Fed. Always wondered point of these ploc and clocs.

Yes, that is my assumption. Most folks here are rebuilding (another assumption) and are looking to pad their available credit so that they have a favourable debt-to-credit ratio. NFCU is extremely popular here for precisely that reason as they are known to give $25K limits on cards and $15K limits on the CLOC fairly easily. I am not sure how long you have lurked here or been a member, but most of the flavours of the month/bandwagon cards/products go viral as they usually give high limits to people who otherwise would not qualify (PSECU, Duck/Beaver cards, BBVA NBA card and NASA FCU to name a few-I've been lurking since 2011 LOL).

Some here have even admitted that they will either not use their NFCU CLOC or will only use it for small amounts to keep it active. NFCU seems to be the most popular LOC here on the boards but most banks/cu's offer them in some form.

As far as banks/cu's preferring their customers not use the LOC, that is another assumption but I think it depends on the bank/cu. Take NFCU for example; they call theirs a CLOC and they make it somewhat difficult to use it outside of overdraft. Or my local bank, they only let me use it for overdraft. I suppose I could transfer my checking balance to savings, leaving $0 in checking and then make a debit card, ACH or check purchase to allow the LOC to cover it-but again, they have set this up to be primarily for overdraft. Then you have the PenFed's, Wells Fargo's and US Banks of the world that want you to use your PLOC as it gives them interest and fees. It really depends on the financial institution. Basically, if they call theirs a checking line of credit or overdraft line of credit, then that is primarily what they want you to use it for. If they call it a personal line of credit then they want you to use it and collect interest from you.

Re: How do you use LOC?

UncleB — Tue, 14 Feb 2017 09:46:09 GMT

@Anonymous wrote:
@AverageJoesCredit wrote:
So a Cloc from Navy federal would be more for show than use? Ive noticed you say most banks / cu's would prefer you not use it. I just see alot of people here raving and trying to get the cloc from Navy Fed. Always wondered point of these ploc and clocs.
Yes, that is my assumption. Most folks here are rebuilding (another assumption) and are looking to pad their available credit so that they have a favourable debt-to-credit ratio. NFCU is extremely popular here for precisely that reason as they are known to give $25K limits on cards and $15K limits on the CLOC fairly easily. I am not sure how long you have lurked here or been a member, but most of the flavours of the month/bandwagon cards/products go viral as they usually give high limits to people who otherwise would not qualify (PSECU, Duck/Beaver cards, BBVA NBA card and NASA FCU to name a few-I've been lurking since 2011 LOL).

Some here have even admitted that they will either not use their NFCU CLOC or will only use it for small amounts to keep it active. NFCU seems to be the most popular LOC here on the boards but most banks/cu's offer them in some form.

As far as banks/cu's preferring their customers not use the LOC, that is another assumption but I think it depends on the bank/cu. Take NFCU for example; they call theirs a CLOC and they make it somewhat difficult to use it outside of overdraft. Or my local bank, they only let me use it for overdraft. I suppose I could transfer my checking balance to savings, leaving $0 in checking and then make a debit card, ACH or check purchase to allow the LOC to cover it-but again, they have set this up to be primarily for overdraft. Then you have the PenFed's, Wells Fargo's and US Banks of the world that want you to use your PLOC as it gives them interest and fees. It really depends on the financial institution. Basically, if they call theirs a checking line of credit or overdraft line of credit, then that is primarily what they want you to use it for. If they call it a personal line of credit then they want you to use it and collect interest from you.

Great synopsis!

This basically outlines the reason I skipped over the NFCU CLOC... I got my credit card with them, and it was approved with a nice SL (since bumped to $20k) and a relatively low 10.99% APR, later raised due to Fed increase, then lowered again at my one-year anniversary to 10.24% - still my lowest rate card.

With the NFCU CLOC, at this time the rate can be from 13.9% APR to 17.9% APR, so in my case even if I were to qualify for the lowest rate (which isn't likely) it would still cost me more to use the CLOC than my credit card... which just doesn't make sense. I'll add that I'm not in need of a 'buffer', but if I was the CLOC would be a great option.

Nothing is ever one-size-fits-all, and on here it's easy to get caught up in the frenzy, especially if you are just coming out of a 'bad' spell credit-wise and suddenly you have options you've not had in a while (in my case 17 years). It was hard (and sometimes still is) to pass over things that just a couple of years ago I would have jumped on with both feet.

Re: How do you use LOC?

stinastina — Sun, 18 Jun 2017 22:15:16 GMT

NFCU CLOC and PLOC are two different animals. The CLOC is just a $500 overdraft. You pay $20 for any amount over $15 and over one day. So if you accidentally write a check for $20 and you only have $10 in the bank but you put the other $10 back in the next day, you won't incur the fee. You can only be overdrawn 45 days and after that, they will cancel your account.

The PLOC, which I don't have yet, is a max of $15K and is an EQ hard pull.

Re: How do you use LOC?

Anonymous — Mon, 19 Jun 2017 02:07:34 GMT

@stinastina you have it backwards. The CLOC is the max 25k. It is not overdraft.

Re: How do you use LOC?

stinastina — Mon, 19 Jun 2017 15:12:31 GMT

@Anonymous wrote:
@stinastina you have it backwards. The CLOC is the max 25k. It is not overdraft.

Actually, I have it all wrong !! Lol !! What I have is Overdraft protection. I'm pretty sure the rep described it as a CLOC but that is not what it says on my paperwork. Carry on !

Re: How do you use LOC?

Marcos8 — Tue, 20 Jun 2017 06:11:43 GMT

Can I use my Penfed PLOC as a pay from account to pay bills from? Can you pay a credit card via ach type pulls from a PLOC if say I wanted to pay a credit card that was due but I don't get paid for a few days?