line of credit

anqet

Hi, do banks in the UK offer unsecured lines of credit to their customers (individuals not businesses)? I'm not talking about a fixed term loan or about an equity line of credit.

I'm referring to a credit limit that the bank makes available to you, to be used when needed (no costs if not used, but if used you get charged daily interest and min monthly payments can be interest only or a percentage of the amount borrowed).

Thank you.

Caz3121

do you mean a bank account overdraft?

anqet

No, it's not overdraft associated with the banking account. It's just a credit product available elsewhere - a separate line of credit account. Unsecured and usually it comes with interest rates lower than credit cards.

I can't post links but you can search for "Scotiabank personal line of credit", for instance, it'll give you an idea.

iolanthe07

I remember these from when I lived in the USA, but I don't think they're generally available here.

anqet

Too bad!

I think the closest equivalent is a home equity line of credit (HELOC) - they function the same way as unsecured lines of credit - you can use the credit when and as you want, up to the credit limit available to you. However the HELOC is secured against your property so you can't get it if you don't have equity in your home.

poppasmurf_bewdley

Why would the banks offer lines of credit which are lower than those they offer with their credit cards and overdrafts?

anqet

Not entirely sure... They make money out of it? The credit market is more competitive in North America and products more diversified than over here? Banks are willing to extend these 'higher risk' credit lines to individuals not only businesses?

On the line of credit you get charged interest daily on the balance so there is no grace period. The way I see it a line of credit is just a flexible non-term loan. You borrow as much as you like and pay it whenever you like (as long as you meet minimum payments and stay within your credit limit of course).