Hesitant about borrowing money? Not sure if it’s a good idea for you? Wondering how to make credit work for you? Yeah, we hear you. It’s a pain – so we wrote this to try to help.
First, let’s get the most important fact out there: credit is debt. It will cost you money. It’s a service you might buy, to help you change your standard of living by acquiring something like a home or a car. That means it’s best to be thoughtful about credit, so you stay in control of your debt. And part of that is thinking carefully about the right product for your needs.
Here's a rundown of the possibilities you might consider. Please know these are all Libro products, but the principles are sound wherever you’re borrowing from. At Libro, we’re all about financial coaching and setting you up for success, whatever you do and wherever you go.
This type of loan gets you money you can spend now, and has to be paid back in installments. It might be how you finance purchases like a vehicle, a home renovation or a vacation. The repayments include some of the principal (that’s the amount you borrowed) and the interest (that’s how the lender makes its money) over an agreed term, meaning you chip away at the debt while paying for the credit.
You might choose variable or fixed interest rates and various repayment options, including different periods. In general, the longer you take to pay the money back, the more it will cost you. That’s worth remembering when you make a decision. Personal loans are a great tool to make a big difference in your life in the short term, as long as you understand the longer-term effect on your budgets and spending.
Lines of Credit
There are different ways to get a line of credit, depending on your circumstances. Some are specific for types of people or what they’re doing, such as a Student Line of Credit to cover the costs of post-secondary education if you’re in university, college and apprenticeship programs. This one can be customized so students only borrow what they need when they need it.
There’s also Overdraft Protection, which is more of a short-term solution. We get it, life happens. This option provides peace of mind if your account becomes overdrawn, and it protects you from unexpected charges if something unforeseen hits you.
If you need a longer-term solution, you might consider a Line of Credit. It’s attached to your chequing account for easy use. It’ll give you flexibility for larger purchases and has interest-only payments at competitive rates.
Then there’s the Home Equity Line of Credit, for people who own their own homes and have some equity built up in their home. With this, you only pay for what you use — when you need it. Also called a HELOC, it’s a secured form of revolving credit. The lender uses your home as a guarantee that you’ll pay back the money you borrow. You can borrow money, pay it back, and borrow it again, up to a maximum credit limit.
So, what’s the difference between a loan and a line of credit?
A loan has set repayment terms and payments. It’s open and payable at any time with no penalty. It’s also a one-off: you get the money at the start and need to pay it back over time. If you want more money, you need to apply again, or agree different terms at the start.
A line of credit is approved with a limit for a specified amount. It can be used and paid back with no restrictions. Payments are generally interest only and the principal is paid back as you see fit. And it usually offers a more competitive interest rate than personal loans.
The process for getting a loan or line of credit from Libro is simple. Three steps and you’re done.
- Meet with a Coach in person or virtually to complete your application and sign or e-sign documents.
- Wait ever-so-patiently for your approval (usually only one or two business days).
- Once approved, access your new loan or line of credit funds once processed.
If you have more questions about credit (and you probably do), we’re here to answer them. A Libro Coach helps you find the right balance. We start by working with you on a personalized Prosperity Plan, which is all about setting your goals. Then we keep working with you to ensure you keep control of your credit tools – and your debt.
To find out more, read here. Thanks for reading this, and good luck!