Capital One Line Of Credit

[Fizzle1979]

I bank with them so I was looking for an ATV loan and I asked about ATV rates...the lady said they were high now because of the economy. But she suggested a Line Of Credit instead. She said you only apply once for LOC...and it's yours until you tell them to close it. She said if you use it for an ATV now and then want to buy something else you can use it again and they dont check your credit again. She said they increase it from time to time also. And you can transfer the money from the LOC to you bank account online! The only catch is that the rate goes up or down as the market does...it's not a set rate. I definately like the idea of applying once and having it to use forever. I told the lady that my EX FICO was 719 and she said they would have no problem approving me. However, I have since paid some of my credit cards off and my personal loan and was hoping they would update before I decided to apply.

Has anyone had any luck with this?

Another thing, I don't think this reports to the CRA's, because the lady said that if I was buying a house and I had a high utilization of my credit cards and the underwriters of the home loan wanted to see it paid down, I could use the LOC to pay off the cards. Does anyone know if a LOC reports to the CRA's?

[lovebug5]

Oooh, this is good information to know. I'll be interested to see if anyone has had experience with this type of thing. Good post, Fizz.

[JustaTexan]

I know my Patelco LOC reports to all 3. It not Cap 1 but it is a LOC. What you are describing sounds cool except for the rate not being fixed. That kind of scares me for some reason. I mean is there a cap on how high or low it can go?

[LeslieR]

I have a CU LOC (it's overdraft protection on my ckg account) - and it does report every month.

[Fizzle1979]

I know my Patelco LOC reports to all 3. It not Cap 1 but it is a LOC. What you are describing sounds cool except for the rate not being fixed. That kind of scares me for some reason. I mean is there a cap on how high or low it can go?

The lady I spoke with (which happens to be the VP of the branch and has dealt with my and my rants in the past) told me that it's whatever prime is at the time. This could be VERY bad if you have $5K on the LOC and it jumped to 22%.

But she said the rates are really low right now. And I'm not going to say I will use it, but I REALLY like the idea of only applying once and having it forever.

[JustaTexan]

I have a CU LOC (it's overdraft protection on my ckg account) - and it does report every month.

You know, I also have OD protection on my checking account and they even call it a LOC but it does not report. It's only $300 though.

[Bigwoodystyl]

The lady I spoke with (which happens to be the VP of the branch and has dealt with my and my rants in the past) told me that it's whatever prime is at the time. This could be VERY bad if you have $5K on the LOC and it jumped to 22%.

But she said the rates are really low right now. And I'm not going to say I will use it, but I REALLY like the idea of only applying once and having it forever.

It will most likely report to all 3, but it's not classified as a credit card by the CRA, so the DTI is treated differently on LOC than on regular unsecured accounts...

(also, you might not get a Visa/MC plastic to go with it, maybe just a set of checks, depending on the product)

Some of these LOC give you a dual option, variable or fixed. They give you a special set of Fixed Rate checks and a set of variable checks.

The Fixed Rates usually have an assortment of different terms, i.e., 5,10,15,20 year terms, etc. And, you get to pick your terms. There is also the general rate or the "Line Rate" or the "variable" rate depending how your contract defines it. The Fixed Rates are also usually tied to the T Bill, either 3 year or 5 year, whereas the variable is tied to the Prime Rate.

I would recommend getting a dual purpose LOC that has the option for a fixed rate and a variable rate on the same product.

Repayment for the general line is usually interest only or 2.5% of the outstanding balance, (no negative amortization)

Repayment for the fixed rate locks is usually fully amortizing based on the rate and the term..

Also, FWIW, Prime + 0.00% is NOT the best that Cap1 can do. There are accounts out there with Prime -0.5, Prime -1.00, etc. From your tendencies, you might want to go nutcase on them until they give you a better rate. How dare they give a better rate to other customers and not offer you the same rate!!!

[Fizzle1979]

I already have a Cap One MC with $5K CL that has a zero balance. But I'm liking the line of credit.

The banker didn't tell me it had different options, she only told me it had variable rate. I will do some more checking with Cap One.

Can you explain this a little more in detail? I am not understanding that accounting talk.

Repayment for the general line is usually interest only or 2.5% of the outstanding balance, (no negative amortization)

Repayment for the fixed rate locks is usually fully amortizing based on the rate and the term..

Thanks for your help!

[Bigwoodystyl]

Repayment of a variable LOC is usually either interest only or 2.5% of the outstanding balance, plus any fees. no negative amortization, or neg-am.

The neg-am provision means, if your balance is tiny, you will have to pay the minimum payment which will gain positive am, even though this will be more than the contracted 2.5%. This 2.5% could also be 2.0, 1.5, 3.0% it depends on your product and the contract....

If it is interest only repayment, the minimum payments will consist of interest only. Which will simply be the periodic finance charge times the period times the Average Daily Balance.

For example, if you have an interest only repayment plan. And, the APR is Prime + 0.0%, and you have carried an average balance of $5,250.00 for the month. Then, your minimum payment will be $22.97, assuming a monthly periodic finance charge. (Some use daily periodic rate)

5.25/12*0.01*5250=22.9688

Keep in mind, if you are in interest only repayment and you pay only the minimum payments, the balance will never decrease.

If you have a 2.5% of the outstanding balance repayment plan, then in the above example, your minimum payment would be $131.25.

If you lock in a fixed rate, then your APR is not usually tied to the Prime Rate, but is instead tied to either a 3 or 5 yr T-Bill plus a margin based on your credit stadning, although every lender is different, and not every lender offers a Fixed Rate provision in their lines of credit... The fixed rate is usually done at simple interest for the term, it's NOT rule of 78s or or any other front-loaded devices, it's not overly complicated..

if you want an LOC, I would suggest getting one that offers you the ability to lock in a fixed rate as well as a variable rate.

While the variable rates are usually interest only repayment, the fixed rates are not. The fixed rates are fully amortizing.

For example, you have two sets of checks on your LOC. Say you want to purchase a car.

If you use the variable rate checks, you will be paying interest only. You can certainly pay above the minimum payments and pay it off faster, but if you only make the minimum, you are paying interest only.

If you think the variable rate (read: prime rate) may be rising, you may want to lock in a fixed rate. In which case you would use the fixed rate checks. However, if you do this, you have now basically created a "mini installment loan" "partition" or "divider" or "locked balance" within your LOC. This fixed rate partition will have a 3,4,5,6, 10, 15 year terms. It depends on your product and your contract. Sometimes you can pick your own terms after you have written the fixed rate checks.

The repayment plan will be just like an installment loan, you will make 60 payments of a certain amount and your interest rate on the partition is fixed.

If you have available credit remaining in your LOC after the fixed rate, then you can still use the LOC to make variable rate purchases, in effect creating two balances within the same LOC. (the variable rate for the purchases, plus the fixed rate for the car)... these two (or 3 or 4 or 5) balances get billed on the same statement with one payment.

Usually, if it turns out the variable rate has dropped or risen, you can request to move the fixed rate partition to a variable rate or vice versa.

That is to say, you could be carrying a balance on your variable line and you are paying interest only, and the balance is not lowering obviously. You may make a point to pay this off in 3 years. If a 3 year Fixed Rate is offered on your product, you can call customer service and have them move your entire variable line rate to a fixed rate at the prevailing fixed rate available on your product for a 3 year term.

Now, the purchases that you made at the variable rate which were a good deal when the variable rate was low, are locked in at a fixed rate and are on a fully amortizing 3 year term. If the variable rate drops, you can usually request that they repost your fixed rate balances back to the variable rate.

You may have to pay a $50-$100 fee to move your balances from fixed to variable or vice-versa. It all depends on your lender and which product you get. Unsecured LOC are generally hard to qualify for, especially if you want a larger limit.

The advantages are the debt, while it is unsecured, is not looked at the same as "plastic debt" by underwriters who might write your mortgage or car loan... The other advantage is that you generally get a better contract rate than you would on a credit card.

I have an LOC and I haven't used it in a few years. I don't use it because I don't need it. It's nice to have the convenience of a huge credit line at a decent rate should I need it, though, which is the only reason I keep it open.

I also don't use it because:

-there is no fee for cash advances unlike credit cards, which is cool

-however, there is also no grace period on these accounts on any balance, even on merchandise and even if you PIF. They don't differentiate between purchases, cash or balance transfers, and interest accrues immediately any time you have a balance of even $0.01.

-if i ever need to carry debt, which is rare, i call my card issuers and i can usually get a promo balance transfer at 0% for 6-24 months with no transfer fee, which beats the heck out of an LOC tied to prime minus a few basis points...

[Fizzle1979]

Thanks for all the information! I'm just really liking the idea of only applying once and having access to it all the time. Not saying I would ever use it.

[Bigwoodystyl]

Thanks for all the information! I'm just really liking the idea of only applying once and having access to it all the time. Not saying I would ever use it.

You're welcome.

But, unfortunately, the information isn't worth too much, b/c I looked around for you and I can't find anybody who currently offers a combined fixed rate, variable rate unsecured LOC.

Most banks still offer the fixed rate, variable rate convenience in HELOC accounts, though. They just don't offer it on the unsecured. At least, if they do, they don't advertise it on the web sites... Maybe it's because Prime is so low right now nobody is interested in anything tied to a T-Bill anyway.. if there's no market, they can't sell it...

Mine is with Wells Fargo. It's called a "Personal Line" LOC I looked for it on the web site and it doesn't look like it offers the same terms.

[Fizzle1979]

Just wanted to update this thread. It does not look like I will be buying a house in the next six months to a year. I went ahead and applied for a LOC from Cap One since I bank with them. I asked for 5K and they approved me for that but at the Wall Street Rate plus 10%...crappy! I found out that it's $25/year to keep the account open but it's linked to my two checking accounts. So if I should happen to over draw on either of them, they will transfer money into my bank account. The $35 NSF is waived...so if I over draw once a year it pays for itself. So basically for $25/year I get an installment tradeline.

Cap one didn't pull EX, EQ they pulled and not sure about TU because I don't have a service to check that report. But all my reports are free of negative information. My utilization for credit cards was 21% installment was 98%.

[LeslieR]

Glad it seems to have worked out even though the interest rate isn't what you'd like.

[lovebug5]

Nice installment TL, Fizz!