How to Borrow Under a Revolving Line of Credit Facility
Revolving lines of credit are open-ended loan products that work in a similar manner to credit cards. Lenders offer lines of credits to commercial clients as well as consumers. When you establish your line of credit, you can access funds when you need the money. Generally, you have to make interest-only payments, which means that you pay nothing unless you actually have a balance on your credit line. Some banks provide you with credit cards or checks that you can use to access your credit line, but in many instances, you have to go to the bank to access funds.
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Instructions
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Contact your bank to confirm that your credit facility has been activated. Home equity lines of credit are processed similarly to mortgages, and it can take a few months for your lender to process your credit application. However, if you set up an unsecured credit line, you often can access funds within 24 hours of submitting your application.
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Ask the banker if you have to make a minimum draw. Some lenders allow you to access any sum of money, but others have minimum withdrawal requirements. If your bank imposes a minimum draw requirement, use other types of credit facilities, such as your credit card, for small purchases.
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Go to your bank and present a teller with at least one form of government-issued identification, such as your passport. Inform the teller that you need to make a credit line withdrawal. Provide the teller with either your account number or Social Security number so the teller can locate the credit facility.
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Complete a credit line withdrawal slip. You must print your name and the amount that you intend to withdraw on this slip. You also must sign the slip.
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Wait for the teller to obtain authorization from the bank's lending department. Once the teller obtains approval, you can take back your ID and count your cash. Ask for a receipt and ensure that the cash you receive matches the amount listed on the receipt.
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Tips & Warnings
Interest payments on equity lines of credit generally are tax deductible. However, high earners who pay the alternative minimum tax cannot deduct equity line interest from their taxes. Therefore, you should consult a tax professional to determine your tax liability before you claim any deductions. Interest payments on unsecured debts and other types of credit lines typically are not tax deductible.
Revolving credit lines often have low interest rates. However, the rates on these products normally are attached to the prime rate, and the prime rate changes every time the nation's leading banks raise interest rates. Credit line agreements usually contain a rate cap, and your interest rate cannot rise above this level, regardless of movement in the rate index. However, rate caps usually are set at close to 20 percent, so your interest rate has plenty of opportunity for upward movement before it hits the rate cap.
