Unsecured Line of Credit

Credit has become a cornerstone of the Australian way of life. It has enabled people to acquire property, start businesses, to develop agricultural land and to make high yield investments. Credit, through products such as the credit card, further empowered Australians to become participants in the global economy by offering a revolving, unsecured line of credit that could be employed whenever they want, for whatever they want, from wherever they want, at whichever establishment they want - anywhere in the world.

What is a revolving, unsecured line of credit?

There are two main components to a revolving, unsecured line of credit:
• Revolving means that a lender grants a loan (similar to a personal loan) that you can use for whatever purposes you have in mind. Unlike the personal loan though, there is no fixed-term repayment plan and your credit is a permanent facility. Your available credit will fluctuate as you spend and pay. In example, if you spend A$5,000 of your A$10,000 credit limit, A$5,000 accessible credit will remain. If you then pay A$3,000 towards the loan, the A$5,000 will increase to A$8,000 in available credit.
• An unsecured line of credit means that you don’t have to put up assets as collateral. In other words, with an unsecured line of credit you don’t have to pledge property (like your home) as security against the loan amount.

A revolving, unsecured line of credit can be used like a flexible personal loan to foot unexpected expenses or to purchase high value items you wouldn’t be able to buy for cash. It can also used for credit card debt consolidation. The most common unsecured line of credit product is the credit card.

Credit card debt consolidation through an unsecured line of credit

Many of us are tempted to roll our credit card debt into our mortgages in order to reduce our repayments and to consolidate debt. This is perhaps not the best way to go about credit card debt consolidation. When you move an unsecured line of credit into a mortgage, you’re likely to find yourself on the receiving end of a double-whammy. Firstly, this type of credit card debt consolidation could be much more expensive. Do the calculation. Even at 7%, you’ll have ended up paying a great deal more after 15 years than you would have after 6 months at a higher interest rate. Secondly – and worse - you could compromise an asset.

There are other safer credit card debt consolidation options available, the best one of which is using an alternative revolving unsecured line of credit that offers better terms and interest rates than your current credit card.

One of the products that are ideal for credit card debt consolidation is CitiBank Ready Credit. This unsecured line of credit takes the form of a no fee, low rate credit card that also behaves like a flexible personal loan, a debit card and a cheque account. Whereas many credit cards offer a 0% introductory interest rate on balance transfers, between 9% and 18% on purchases and between 12% and 23% on cash advances during the first 6 months, this unsecured line of credit product offers 2.9% interest on your balance transfer, 2.9% on the purchases you make and 2.9% on cash advances your draw during the introductory period.

So, if you’re thinking about credit card debt consolidation at present, an unsecured line of credit that offers these types of features is probably a better alternative to risking home and hearth.

For additional information on credit cards or related topics please visit our library of credit card articles.