How To Have Money When You Need It Most

If you're looking for a larger sum of money, a line of credit might be the answer. A line of credit is a revolving loan and is almost always attached to the equity in your home. Debt consolidation, job loss, home improvements, and college expenses are only a few of the instances in which a revolving loan can help.

What It Is

A line of credit, also sometimes called a home equity line of credit, is a revolving loan that can be tapped on an as-needed basis. The money is often available through a series of special checks provided to you when you close on your loan. Available credit is decreased by the amount you use, and increased again by the amount you pay, making it an ideal "rainy day" solution for a variety of purposes.

Interest on is only charged on the amount of credit in use at any given time, and payments are set up in similar fashion to a credit card, with the option of paying a "minimum monthly payment" or a greater amount should you decide to do so.

Insurance Against Life's Little Disasters

A line of credit can be a terrific alternative to credit cards in shoring up your "emergency" account. It doesn't "feel" as easy to spend the money because you can't just whip out a little plastic at the first sign of the spending demon. Spending from it definitely gives ones pause, especially if it's attached to the equity in your home - and that's a good thing!

On the other hand, if your hot water heater blows a gasket, your roof springs a leak, or you suddenly find yourself unemployed, you can pull through a tough spot, usually with a lower interest than a credit card and often with a higher credit limit.

Not a Last Minute Contingency

The irony of a line of credit is that it's hard to get when your credit score has tanked or you're out of work - yet that's exactly the type of situation in which it is most helpful. For this reason, it is best applied for when you don't need it.

If you are gainfully employed and your credit score is in good shape, now is the perfect time to apply for a home equity line of credit. The approval process will be easier and faster, and you'll probably qualify for a higher loan amount.

Once you've been approved, it can bring a real sense of security. Now you know that you have a little (or a lot!) extra cash available and easily accessible should an emergency strike.

If you don't use it, you don't pay for it. But it's sure nice to know it's there!