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LOC

mt2va
Established Contributor

LOC

Can someone explain how a LOC works?  How does it report differently than a credit card?  How is it different?
Starting Scores 10/12: EQ 460 (FICO)/TU 502 (FAKO)/EX 474 (FAKO)
(7/14): EQ 572 (FICO)/TU 624 (FICO)/ EX 612 (FICO)

Current (2016): EQ 605 (FICO)/TU 657 (FICO)/EX 646 (FICO)




Message 1 of 8
7 REPLIES 7
llecs
Moderator Emeritus

Re: LOC

A line of credit is an account set up with your bank where you are given a limit of x dollars and you can spend as much as you want up to that amount. In turn, you have to pay interest on it monthly and typically you'd have to pay it off at some point over the course of a set time period. I had a biz LOC of $30k. I could use all $30k but was charged a rate of 9% on the unpaid balance and had to pay it to $0 at least once in a given year as per my terms. It was great because I could use it for overdraft or to transfer as part of our operating costs.

LOCs report as a revolving account, usually, and the limit or high balance is the limit factored in by FICO.
Message 2 of 8
mt2va
Established Contributor

Re: LOC

Finally a reply thank you.  I guess I'm not sure I understand how it works.  How is it different from a credit card?  Is it more like a home equity?? 
Starting Scores 10/12: EQ 460 (FICO)/TU 502 (FAKO)/EX 474 (FAKO)
(7/14): EQ 572 (FICO)/TU 624 (FICO)/ EX 612 (FICO)

Current (2016): EQ 605 (FICO)/TU 657 (FICO)/EX 646 (FICO)




Message 3 of 8
llecs
Moderator Emeritus

Re: LOC

It is like a CC, but you physically don't have a CC, your rate could be lower, and you may have to pay it in full within a certain time period if required. And because you sign a contract, your rate will likely remained fixed.

A HELOC is a LOC secured by a home.
Message 4 of 8
mt2va
Established Contributor

Re: LOC

Thanks for the info.  I guess I couldn't see what the point of a LOC would be if people have a CC.  Now I think I understand a little better how it would work. 
Starting Scores 10/12: EQ 460 (FICO)/TU 502 (FAKO)/EX 474 (FAKO)
(7/14): EQ 572 (FICO)/TU 624 (FICO)/ EX 612 (FICO)

Current (2016): EQ 605 (FICO)/TU 657 (FICO)/EX 646 (FICO)




Message 5 of 8
mt2va
Established Contributor

Re: LOC

Since I'm not able to get a CC currently due to my credit does anyone think I could get a LOC secured by a vehicle title?? 

 

I've got something I need money for that I've run out of all my options.  My final option would be a payday loan or such type but I was in payday loan cycle about 3 years ago & vowed never again. 

 

I own outright (because I financed it with a personal loan to myself from my 401(k) account) a 2006 Kawasaki KLR650 motorcycle.  It only has about 100 miles on it & has a ton of upgrades so I'm sure its worth even more than the $5,000 or so I paid for it 3 years ago.  Would a bank give me a small line of credit if I secured it with the title??  Like maybe $2,000-$2,500??   

Starting Scores 10/12: EQ 460 (FICO)/TU 502 (FAKO)/EX 474 (FAKO)
(7/14): EQ 572 (FICO)/TU 624 (FICO)/ EX 612 (FICO)

Current (2016): EQ 605 (FICO)/TU 657 (FICO)/EX 646 (FICO)




Message 6 of 8
Moderator Emeritus

Re: LOC

Possibly, it would depend on bank and your credit.

 

Some LOC are not secured.

 

You might try for a installment loan as well.

Message Edited by sidewinder on 04-04-2009 11:52 AM
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Message 7 of 8
Rebuild2022
Super Contributor

Re: LOC

LOC is not quite same as credit card. With LOC you can write a check and take cash any time you want. If you try with a credit card considered as cash advance you would pay a fees for the transaction. For CC bank gets a commision for each transction from vendors so they make money there so qualifying requirements for CC would be less than LOC. Though some banks can attach a debit or credit card to LOC so they can make extra money and also give extra convenience to customers. In general banks normally would like to see higher scores for LOC than CC.
Gardening since 08/2020
Message 8 of 8
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