8. Revolving lines of credit Revolving lines of credit generally do not involve the use of credit cards and often offer borrowers more credit at lower interest rates than credit cards. Borrowers use checks to pay their bills, purchase goods and services, or even to take cash advances. Banks, brokerage houses, and other financial institutions offer open account credit to qualified borrowers. Revolving Credit Lines Overdraft protection is linked to your checking account in case you overdraw your account. It draws on a line of credit that is usually established for between $500 and $1,000 You should use your overdraft provision only for emergencies Frequent use of your overdraft provision can signal that you're managing your cash wisely You receive funds from an unsecured personal line of credit based on a regular disbursement schedule Securing this type of line of credit doesn't require going through the formality of setting up a new loan. It draws on a line of credit that can with no dollar limitation Remember, even though acquiring the funds is as simple as writing a check, the funds still represent a loan. Payments are usually structured to be due once a month Home equity lines of credit enable you to acquire cash based on the equity in your home The majority of lenders extend home equity lines of credit based on either 100% of your equity or some portion, usually 75% to 80% of your home's market value, whichever is more . If you have an existing mortgage on your home, most lenders will decrease your maximum line of credit by the outstanding balance of that mortgage Today your home is worth $200,000. The balance you owe on your mortgage is $85,000. Your equity is 5 You do not have to sell your home in order to gain access to your equity. According to your lending institution's policy, the maximum home equity line of credit is 80% of your home's worth Eighty percent of your home's worth is 5 Your lending institution follows the practice of most lenders as described in the previous paragraph. Your line of credit will be $ This line of credit is considered a loan that will be secured with an additional mortgage on your house This line of credit is considered a loan that will be described in the previous paragraph. Your line of credit will be $ secured with an additional mortgage on your house What do the three major forms of open (non-credit card) credit have in common? Check all that apply. They require collateral. They provide furids that are easy to spend unwisely. They provide funds that can easily be exhausted, They are helpful in emergencies Knowing how revolving lines of credit work will help you to make informed decisions about using them. Answer the following questions about the various options available through revolving credit lines. Using overdraft protection without getting into trouble with it requires Remember that the funds used for the protection are As such, there a fee attached to using the funds. Ask yourself if the accumulating fees are really worth your overdrafts, for many of which you may have forgotten the original use. Remember that a big danger is that Using an unsecured line of credit can help you once approved, obtaining cash advances is The debt created can Abg An advantage of using a home equity line of credit is danger that you have the cash flow necessary to make the payments. You lose your house 8. Revolving lines of credit Revolving lines of credit generally do not involve the use of credit cards and often offer borrowers more credit at lower interest rates than credit cards. Borrowers use checks to pay their bills, purchase goods and services, or even to take cash advances. Banks, brokerage houses, and other financial institutions offer open account credit to qualified borrowers. Revolving Credit Lines Overdraft protection is linked to your checking account in case you overdraw your account. It draws on a line of credit that is usually established for between $500 and $1,000 You should use your overdraft provision only for emergencies Frequent use of your overdraft provision can signal that you're managing your cash wisely You receive funds from an unsecured personal line of credit based on a regular disbursement schedule Securing this type of line of credit doesn't require going through the formality of setting up a new loan. It draws on a line of credit that can with no dollar limitation Remember, even though acquiring the funds is as simple as writing a check, the funds still represent a loan. Payments are usually structured to be due once a month Home equity lines of credit enable you to acquire cash based on the equity in your home The majority of lenders extend home equity lines of credit based on either 100% of your equity or some portion, usually 75% to 80% of your home's market value, whichever is more . If you have an existing mortgage on your home, most lenders will decrease your maximum line of credit by the outstanding balance of that mortgage Today your home is worth $200,000. The balance you owe on your mortgage is $85,000. Your equity is 5 You do not have to sell your home in order to gain access to your equity. According to your lending institution's policy, the maximum home equity line of credit is 80% of your home's worth Eighty percent of your home's worth is 5 Your lending institution follows the practice of most lenders as described in the previous paragraph. Your line of credit will be $ This line of credit is considered a loan that will be secured with an additional mortgage on your house This line of credit is considered a loan that will be described in the previous paragraph. Your line of credit will be $ secured with an additional mortgage on your house What do the three major forms of open (non-credit card) credit have in common? Check all that apply. They require collateral. They provide furids that are easy to spend unwisely. They provide funds that can easily be exhausted, They are helpful in emergencies Knowing how revolving lines of credit work will help you to make informed decisions about using them. Answer the following questions about the various options available through revolving credit lines. Using overdraft protection without getting into trouble with it requires Remember that the funds used for the protection are As such, there a fee attached to using the funds. Ask yourself if the accumulating fees are really worth your overdrafts, for many of which you may have forgotten the original use. Remember that a big danger is that Using an unsecured line of credit can help you once approved, obtaining cash advances is The debt created can Abg An advantage of using a home equity line of credit is danger that you have the cash flow necessary to make the payments. You lose your house