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UPDATE: Benefits of a personal line of credit?

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UPDATE: Benefits of a personal line of credit?

Just curious what everyone's thoughts were on the benefits of having a line of credit. I can understand the obvious panic button option but is it worth having? What has everyone used one for in the past?

 

UPDATE: So you all convinced me, as easy as it was, I pulled the trigger and they gave me $20k out of the requested $25k through PenFed. Not really concerned about the amount as I have no plans for it. However, depending where this shutdown thing goes, it could come in handy.

 

The process was really quite easy. I could not accept the "counter offer" on the website so I just replied to the email and they did it for me. Didnt have to call and wait, etc. I am still happy with my decision to switch to PenFed.

 

 




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TOTAL: $128k | EX: 808 TU: 810 | 28 yo
Message 1 of 6
5 REPLIES 5
Moderator Emeritus

Re: Benefits of a personal line of credit?

Panic button if you need cash, usually somewhat lower financing rate than a typical credit card.

 

I'm really not enthused by the idea of a traditional emergency reserve personally as I'm just losing money sitting in the vast majority of checking and savings accounts: there's nothing I can think of where I have to pay cash right now, and I can get money into my account quickly from either my HELOC or PLOC next business day rather than selling equities.

 

After that I have the option of either paying it off out of cash flow, or selling the aforementioned securities which take longer to clear.

 

That's my use for them anyway, actually got to the point of using my Penfed PLOC for real where I had a cash shortfall and then the Tesla came in faster than anyone could've expected: so I had to cough up cash and I had credit cards coming out of grace period - 3K from the PLOC topped off the account and was paid back a few weeks later.  

 

Prior to that it'd gotten no use over the 3 years I've had it.




        
Message 2 of 6
Frequent Contributor

Re: Benefits of a personal line of credit?

Say your credit card statement period happens to be December 1 through December 31.

The following day, Jan 1 of the next year, you make a big purchase.

Reason could be some special flash sale or there is other time sensitivity to making the purchase.

 

Statement containing the purchase is Jan. 1 through Jan. 31.

Issuer sends bill, with payment due Feb. 26.

You have cash on hand to make minimum payment by Feb. 26 but will not have enough to pay in full until your bonus from work gets direct deposited on March 1.

You take money from line of credit to pay bill in full on Feb. 26, then pay off line of credit when bonus clears March 1.

 

You had the use of the purchase when you needed it but only paid interest for several days and you avoided being hit with interest on the purchase on your card account.

You also avoided accruing trailing interest on other purchases on that card as opposed to if you had only paid the minimum.

 

Arbitrary dates above to make scenario easy to write and read.

 

 

Message 3 of 6
Established Contributor

Re: Benefits of a personal line of credit?

For me the biggest benefit of a PLOC is that it is a revolving account with a very low chance of being closed for lack of use. 

Message 4 of 6
Regular Contributor

Re: UPDATE: Benefits of a personal line of credit?

UPDATE: So you all convinced me, as easy as it was, I pulled the trigger and they gave me $20k out of the requested $25k through PenFed. Not really concerned about the amount as I have no plans for it. However, depending where this shutdown thing goes, it could come in handy.

 

The process was really quite easy. I could not accept the "counter offer" on the website so I just replied to the email and they did it for me. Didnt have to call and wait, etc. I am still happy with my decision to switch to PenFed.

 

As always, thanks for the support!




Next Steps:







TOTAL: $128k | EX: 808 TU: 810 | 28 yo
Message 5 of 6
Valued Contributor

Re: UPDATE: Benefits of a personal line of credit?

Glad it worked out for you. In the future check out Unify Credit Union as well.

Over the past few years, I have opened savings, checking, CC and PLOC. The interest rates are better than PenFed. 

Message 6 of 6
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