Key Takeaways
- A secured line of credit is guaranteed by collateral, such as a home.
- An unsecured line of credit is not guaranteed by any asset; one example is a credit card.
- Unsecured credit always comes with higher interest rates because it is riskier for lenders.
Is a line of credit considered a loan?
A line of credit is a preset borrowing limit that can be used at any time, paid back, and borrowed again. A loan is based on the borrower’s need, such as purchasing a car or a home. Credit lines tend to have higher interest rates than loans. Interest accrues on the full loan amount right away.
Does a line of credit require collateral?
Personal lines of credit are unsecured, which means you don’t need to offer collateral to protect the lender if you default. That makes it different from home equity lines of credit (HELOCs), which are secured by the equity in your home.
How much is a secured line of credit?
Secured Line of Credit Limits are available from $5,000 to as much as 65% of the value of your home, less any prior outstanding mortgages. If there are no outstanding mortgages, limit is available up to a maximum of 65% of the value of your home.
What makes a secured line of credit secured?
A secured line of credit means you’re promising an asset like real estate or a savings account as collateral in case you don’t pay back what you owe. With an unsecured line of credit, you don’t have to put down an asset as collateral to secure the loan.
How is a line of credit like a loan?
What is a line of credit? A line of credit is essentially a reusable loan. You can borrow up to a certain limit, make minimum payments, pay interest, pay off your balance, and borrow again. You can repeat this process as many times as you like as long as your line of credit is open and in good standing.
What happens if you default on a secured line of credit?
Similarly, a business or individual can obtain a secured line of credit using assets as collateral. If the borrower defaults on the loan, the collateral can be seized and sold by the bank to recoup the loss.
Can you get a secured line of credit from CIBC?
No matter what your borrowing needs are, CIBC has secured and unsecured loans and lines of credit that can help you meet your financial obligations. You can apply for a loan or line of credit online, or speak with a CIBC advisor at 1-866-525-8622 if you have questions, or would like to learn more about possible lending options.
