20000 Line of Credit at 7.70%

[mofnah]

@hishandsandfeet Probably still charge you min 1-day. banks.

 

[monsoon]

@debrakayh True, but like @kevin76 said, within a few days you can sell some investments to create a true emergency fund when needed for those exigent circumstances.

There's some added risk, but there's also some added reward (of returns on what would otherwise be sitting in a HISA) .

Everything is a risk/reward choice.

 

[jordan221]

@monsoon

within a few days you can sell some investments

The problem is that if the markets are down, you might be selling at a loss.

Actually, if you had done started this 2 years ago, you would have been paying the higher interest rate for nothing.

If you do it in a taxable account, you can at least write off the interest.

 

[monsoon]

@jordan221 And most likely you'll never have to do this at all since it's a backup plan to a backup plan.

 

[resjudicata]

@debrakayh Why would they do that if you're making minimum payments?

 

[oneofgodsown]

@debrakayh You should be able to just take out another one though, no? Like if nothing has changed with your credit standing there should be no reason you wouldn't be approved for something you already had and never needed?

 

[debrakayh]

@oneofgodsown Nobody intends to have a credit score in the 600s, it happens sometimes due to unforseen circumstances.

 

[oneofgodsown]

@debrakayh Yeah I've been there. I just recently was pre-approved for two separate locs and I've been hearing a lot about banks shutting them down on people. I'm just wondering if nothing changes with my credit standing if the bank would just issue me a new one upon request should they pull it from lack of use

 

[debrakayh]

@oneofgodsown It's typically not in the bank's best interest to call loans and mortgages on people, but it's not unheard of, and it's not always for reasons that make sense. I personally know two people that had their "client relationships" ended with their bank with very little explanation of why. They both believe it was related to the industries they work in.

 

[danidebb]

@resjudicata You should use make sure you use it a little bit. I never used my 25k line of credit and Scotiabank lowered it to 1k.

 

[empathy_isthe_key]

@danidebb My bank was going to make my LOC inactive. They advised me to transfer in/out $0.01, every year between the LOC and another account to maintain its active status. I just set up an automatic transfer once yearly for this. Simple enough.

 

[resjudicata]

@danidebb Good point. We are with Scotia’s private banking, so I don’t think they change anything on our account automatically, but it could happen generally. Instead of using it, though, I would probably just take my chances.

 

[lase3]

@resjudicata Tangerine is offering limited period LoC at 2.99

 

[christian_follower]

@withwonderingawe I'm looking into the fine details and it looks like you're correct! It's RSP catch-up LoC. Looks like I'll pass it because of the catch you mentioned! Thank you

 

[sav2ii]

@christian_follower FWIW I have a regular Tangerine LOC at 7.2% (prime +0%). Got it offered at some point ~2 years ago and definitely worth accepting. I don't have a mortgage or investments with them, just banking/CC - so maybe consider if you're looking for one.

 

[nibbana]

@withwonderingawe You can initially do it with Scotiabank then move the stocks into your other rrsp

 

[maximus242]

@christian_follower Sounds like the offer I got, which is for the RSP catch up line of credit, and can only be put into your rrsps.

 

[danxox]

@maximus242 Wouldn't this only be worth it if your RSPs are going to grow faster than 7.7%? Depending on your risk comfort level and the actual performance of the market, it could be very hard to find RSP investments that grow faster than your interest accumulates. Even then, it's going to whittle down your effective return rate greatly.

 

[chadnyc]

@danxox one can use it to aquire assets like property, then rent it out and enjoy the value of the property increasing monthly while the tenant takes care of the mortgage payments for you through rent then keep buying more and more property with the equity from the first 2 properties. I did this, and life is good on my end never do I worry about money anymore

 

[spiritchill]

@chadnyc This, along with another person's mention of using their LOC for equity speculation, is an example of why we need higher rates for longer.

Credit has been too cheap for too long.

And I'm not being salty. I have rental real estate too, but long-term low interest rates have built a lot of leverage into the economy.