Easy Way to Establish a Revolving Line of Credit

A revolving line of credit is a set amount of money that you have available to borrow at any time. You pay nothing unless you take money out and then you pay it back at a set interest rate. So, if you have a line of credit of $50,000 and take out $10,000, then you pay that $10,000 back, plus whatever interest has accrued. The most common is a home equity line of credit, which creates a line of credit based on the value of your home and how much is left on your mortgage.

Instructions

1

Appraise your house. Find a reputable professional home apprasier locally through either the Chamber of Commerce or Better Business Bureau. He will come to your home to examine it both aesthetically and physically as well as ask you questions about its age and condition. He will use that to create an appraisal estimate amount. An appraisal can greatly increase the value of the home, especially if one has not been done in years or if there have been renovations.

2

Examine your mortgage. Contact the bank that has the mortgage and set up an appointment with one of their lending specialists. Have him sit down with you and tell you how much money is left on your mortgage as of that moment. Use the new appraisal amount and subtract it from the amount left on the mortgage. This is your equity, and the amount of your line of credit will be a percentage of the total equity in the home. What percentage that is will depend on the financial market and your credit score.

3

Improve your credit score. Check your credit report and score using one of the three major credit bureaus, Equifax, TransUnion and Experian. If it is below 700, raise it by practicing good credit habits. You should catch up on any credit card payments you are behind on, lower your total credit debt and pay all of your bills on time. These will increase your score over time and make you eligible for the best interest rates.

4

Gather a list of potential lender banks and go down the list one by one, finding out their line of equity programs as well as application fees, average interest rates, etc. Once you have chosen a bank, fill out the appropriate forms and let the bank check your credit. The bank will then decide how much your line of credit will be, your interest rate on borrowed money and your minimum payment for any money borrowed.