Best Rates for Line of Credits?

[eejikes]

Anyone have any advice on how I can get better rates than the current prime plus 3.2% (9.2%) I am being offered by ING for an unsecured personal LOC.

[TrevorK]

Anyone have any advice on how I can get better rates than the current prime plus 3.2% (9.2%) I am being offered by ING for an unsecured personal LOC.

Talk to the bank that you do your daily banking with, I didn't even have to negotiate with CIBC to get prime + 1.5%

[eejikes]

Thanks, I think I should, ING actually sent me a pre approved offer for the LOC so I accepted, didnt really know I could do much better, now I know, Ill do just that.

[George W. Bush]

The lowest is about 6% if you qualify for that only. Rates have gone up compared to say, 2 - 3 years ago.

[eejikes]

Thanks umm, Mr. President :)

[volan]

I got prime + 1 from RBC. I had to shop around a lot and talk to several loan specialists before I finally found one willing to work with me.

[gman]

The lowest is about 6% if you qualify for that only. Rates have gone up compared to say, 2 - 3 years ago.

You mean prime and not 6%. As far as I know, nobody offers a 6% fixed LOC. If you mean prime + 6, for sure, it is not the lowest and probably the highest from a normal bank.

[pitz]

As far as I know, nobody offers a 6% fixed LOC.

I know someone who has obtained such a product from TD on an unsecured basis.

He is a millionaire however, and has all of his money in 3% GICs at TD however ;). So hardly any risk of default that the bank couldn't set-off with other funds on deposit. The guy is pretty stupid if you ask me (having a LOC, and buying 3% GICs), but TD gladly takes his money.

[volan]

He is a millionaire however, and has all of his money in 3% GICs at TD however ;)... The guy is pretty stupid if you ask me (having a LOC, and buying 3% GICs), but TD gladly takes his money.

If the guy is a millionaire, he must be doing something right.

[morpheiz]

If the guy is a millionaire, he must be doing something right.

stupid millionaire is smarter than pitz

[arnyk]

stupid millionaire is smarter than pitz

Well he sure as heck didn't make that million from investing. If he combined his potential earning power with even an ounce of financial common sense, maybe he'd be a billionaire.

Paying 6% on a LOC while earning ~2% after-tax on a GIC means you're LOSING 4% of your net worth each and every year. Assuming he's "fully" invested, he'll have lost half his money in 17 years, before inflation.

[volan]

Well he sure as heck didn't make that million from investing. If he combined his potential earning power with even an ounce of financial common sense, maybe he'd be a billionaire.

Paying 6% on a LOC while earning ~2% after-tax on a GIC means you're LOSING 4% of your net worth each and every year. Assuming he's "fully" invested, he'll have lost half his money in 17 years, before inflation.

The interest on the LOC is tax deductible if it's going to make an investment, so the loss will be less than 4%, however still a loss IF he's using his LOC to invest in GIC's. It was my understanding that the two were not related, he just had an LOC and he also invested in GIC's.

[arnyk]

The interest on the LOC is tax deductible if it's going to make an investment, so the loss will be less than 4%, however still a loss IF he's using his LOC to invest in GIC's. It was my understanding that the two were not related, he just had an LOC and he also invested in GIC's.

Ok. I have $100 in cash and cash equivalents earning 1.8% after tax. I want to buy an investment with an expected return of 6% after tax.

Do I:

A) Keep my $100 in cash/cash equivalents earning 1.8% after tax, and THEN borrow $100 from my LOC (effective interest rate: 3.6%) to invest.

End Result:

$100 becomes $101.8
$100 becomes $2.40 (net of interest expense and loan repayment).

Final Gain: 4.20%

OR

B) Use my $100 in cash/cash equivalents to buying the investment, AND borrow $100 from my LOC to invest.

$100 becomes $106.00
$100 becomes $2.40 (net of interest expense and loan repayment)

Final Gain: 8.40%

OR

C) Forget about leveraging, let's just use our original $100 to invest instead.

$100 becomes $106.

Final Gain: 6.00%

IOW. you're an idiot if you borrow money @ 6.00% while earning 3.00% on cash you already have on hand.

[gman]

Having a fixed 6% LOC does not mean he will use it right now. He can use it when the interest rate of GIC climbed to 10% assuming his LOC is indeed fixed at 6%.

I don't mind to have a fixed 6% LOC because I can keep it and use it at the right moment.

Also, you don't cash out your 1 year 3% GIC just because you are short $2000 for 2 days. LOC serves that purpose nicely.

[arnyk]

Having a fixed 6% LOC does not mean he will use it right now. He can use it when the interest rate of GIC climbed to 10% assuming his LOC is indeed fixed at 6%.

I don't mind to have a fixed 6% LOC because I can keep it and use it at the right moment.

Also, you don't cash out your 1 year 3% GIC just because you are short $2000 for 2 days. LOC serves that purpose nicely.

That's exactly what I said.

Don't borrow to invest when the effective spread isn't in your favour.

I said nothing about cashing out because you're "short" for 2 days, that's what a LOC generally functions as - a short term credit facility.

[pitz]

"Cashing" GICs can be a terrible proposition as well. I called up Outlook Financial to try and cash a few of mine (at 5.25%) that are currently putting me into a 'negative spread' situation as arnyk alluded. They told me they would recalculate all of the interest to date @ 2%, and send me the proceeds >:(

Its far less expensive for me to tolerate the negative spreads for another year I guess. But don't get fooled into thinking 'cashable' means that you'll get all of your money back.

[pitz]

If the guy is a millionaire, he must be doing something right.

Yeah working 70 hours a week, having absolutely no life, and being paid reasonably well for doing so.

He'd have $10+ million if he invested his money in a half reasonable fashion. And would probably be able to retire at a reasonable age, instead of probably retiring to a grave because of a heart attack.

[gman]

That's exactly what I said.

Don't borrow to invest when the effective spread isn't in your favour.

I said nothing about cashing out because you're "short" for 2 days, that's what a LOC generally functions as - a short term credit facility.

Who said "the millionaire" mentioned in this thread borrow from LOC to invest to GIC"?

You said:

Well he sure as heck didn't make that million from investing. If he combined his potential earning power with even an ounce of financial common sense, maybe he'd be a billionaire.

Paying 6% on a LOC while earning ~2% after-tax on a GIC means you're LOSING 4% of your net worth each and every year. Assuming he's "fully" invested, he'll have lost half his money in 17 years, before inflation.

How did you conclude that? You based that only on:

1. he has low interest rate GIC.
2. he has a 6% fixed LOC.

You don't know he does not have other kind of investment (until post #17 of this thread I guess). Hack! The GIC may only be 1% of his profilo.

[pitz]

Its not that all of uncommon of a situation either.

Doctors, Dentists, and highly paid tradespeople (like Fort McMurray welders, and oilfield people) are the worst offenders. They aren't taught money management skills, so they don't understand that its not a good idea to invest in 3% GICs while carrying a large credit card balance.

Lots of people in the above occupations go bankrupt every year, despite far than above-average earnings. The root cause is almost always related to innappropriate and inefficient management of credit.

[arnyk]

Who said "the millionaire" mentioned in this thread borrow from LOC to invest to GIC"?

Who said he didn't?


How did you conclude that? You based that only on:

1. he has low interest rate GIC.
2. he has a 6% fixed LOC.

You don't know he does not have other kind of investment (until post #17 of this thread I guess). Hack! The GIC may only be 1% of his profilo.

Yeah, I based my assumptions on those two facts. I didn't go around speculating about some "other" kind of investments he "may" or "may not" have.

Alrighty then, let's not go around calling people idiots without thinking long and hard about it first. ;)