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 in case you overdraw your account. It draws on a line of credit that is usually established . You should use your overdraft provision . Frequent use of your overdraft provision can signal that youre .

You receive funds from an unsecured personal line of credit . Securing this type of line of credit going through the formality of setting up a new loan. It draws on a line of credit that can be . 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 .

Home equity lines of credit enable you to acquire cash based on the . 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 homes market value, whichever is . If you have an existing mortgage on your home, most lenders will your maximum line of credit by the outstanding balance of that mortgage.

Today your home is worth $125,000. The balance you owe on your mortgage is $5,000. Your equity is $

. You have to sell your home in order to gain access to your equity. According to your lending institutions policy, the maximum home equity line of credit is 80% of your homes worth. Eighty percent of your homes worth is $

. 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 .

What do the three major forms of open (non-credit card) credit have in common? Check all that apply.

They provide funds that can easily be exhausted.

They are helpful in emergencies.

They provide funds that are easy to spend unwisely.

They have potential tax advantages.

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.

Using an unsecured line of credit can help you . Remember that a big danger is that once approved, obtaining cash advances is . The debt created can .

An advantage of using a home equity line of credit is . A big danger is that you have the cash flow necessary to make the payments. You lose your house.