Line of Credit vs. Credit Card

5 Replies

I am about conduct a local flip with a new partner. My financial obligation in the deal will be to provide the funding for rehab costs. While I have some cash for this, I was going to get a line of credit as a quick source of funding for emergencies, or if  the rehab costs are more than I can pay cash for. 

In my research however, I cannot see a reason to get a line of credit over a credit card. My findings show: 

- Interest rates on unsecured lines of credit are higher than credit cards, 

- Limit/credit amounts are about the same

- Credit cards are faster and easier to utilize during payments

- Credit cards through local credit unions make it extremely easy to get cash advances, and the fees associated with them are less than the difference in the higher interest rates of the line of credit. 

- Lines of credit require checks, money orders, or cash for payment. 

What am I missing? I know I must be over looking something because everyone talks about utilizing lines of credit as source for funds and payments. 

What are the benefits of a line of credit over a credit card? 

What are the down sides of a credit card over a line of credit?

Everyone is talking about HELOC - home equity line of credit secured with your primary residence.

Unsecured line of credit is harder to get and it's not that advantageous as HELOC.

More of that, you need LOC for cash - like paying contractors. Credit card is good to buy materials, appliances etc, and it's usually 0% for a year or 18mo - on purchases. If you take cache via convenience check - there is fees upfront.

I wouldn't take cash advances - rates are at the ball ark of default - like 18-24%....why?!?

Especially if you do have done cash reserves.

Get credit card for purchases, cash to pay contractors and it's all good.

I have an unsecured Personal line of credit with TD bank I believe its interest range right now is in 10% range which is better than what most CC offer unless you're getting one of those special 6 month to a year special Promotions..

Yes a lot of BP members do talk about getting line of credits the most popular would probably be a HELOC which is a secure line of credit would give you the best rates..

@Nicholas Seaver if we assume that rates and payments are the exact same for Lines of Credit and Credit Cards the LOC is still superior because you can write off the interest on your tax returns. That alone might be worth the stretch for getting one. In either case I would highly recommend having a plan to pay these back as quickly as possible. Good luck!

Use business credit cards with intro 0% interest for 6-18+ months. Only pay on what’s borrowed. When cash out refinance\sell, pay the debt back, rinse and repeat although you may need to obtain another 0 interest card to do so depending on how time is left.