How do I pay back my Personal Line of Credit? | Consumer Financial Protection Bureau (2024)

FAQs

How do I repay my personal line of credit? ›

Like a credit card, you will pay a monthly bill that shows your advances, payments, interest, and fees. There is always a minimum payment, which may be as much as the entire balance on the account. You may also be required to “clear” the account once a year by paying off the balance in full.

Paying back a line of credit

You'll get a monthly statement showing the amount owing on your line of credit. You must make your minimum payment each month. Usually, your payment is equal to the monthly interest. However, paying only the interest means that you'll never pay off the debt that you owe.

“You access the money as you need to use it, and your repayment is based on what you've used.” Once approved for a PLOC, you can access funds via a revolving line of credit. That money can be tapped in various ways, including initiating a transfer via mobile app or withdrawing the funds at your local bank branch.

With any loan product, you can run the risk of getting into more debt than you can manage. If you cannot pay off the credit that you use, then your credit score will decline. The lender may also go after your assets or, for example, garnish your wages to get its money back.

The debt avalanche method

This method focuses on paying off the debt with the highest interest rate first. After that's paid, you shift to the debt with the next highest interest rate and so on. It's a highly efficient way to pay down debt.

If you, the cosigner, decide later that you no longer want your name on the loan or line of credit, it can be difficult to remove yourself. However, it's possible to remove yourself as a cosigner from a loan either by using a cosigner release form, refinancing the loan, or paying off the loan.

Borrow funds when you need them: You can transfer funds from your line of credit account to a checking account on your phone, online, in person at a branch, or with checks. You can borrow up to a predetermined limit set by your lender and use the funds however you need.

A resounding yes, because doing so has many benefits. But how does paying back a HELOC work? Paying off debt sooner means you'll owe less in interest over the life of the loan, which saves you money.

Many personal lines of credit have a life cycle with two stages: the draw period and the repayment period. These stages usually last three to five years each. Draw period: Think of your draw period as your borrowing period. Here, you'll use a specific card or checkbook to draw from your line of credit.

How do I cash out my credit line? ›

There are several ways to get cash back from your credit card. You can withdraw money at an ATM or receive convenience checks from your card issuer that, when deposited, draw from your credit line.

You can pay a line of credit with a credit card using a balance transfer, cash advance, mobile payment service or money order. It is not possible to directly charge a line of credit payment to a credit card, though, as issuers do not want you to consistently borrow to pay off borrowed money.

You can pay down your balance at any time. However, you may need to make a minimum monthly interest payment. Offers non-revolving credit. You get the full loan amount and must repay in installments until you've paid off both the principal and interest.

Many lenders provide borrowers with checks or a card linked to the line of credit that can be used to draw money as needed. You can also have the money deposited into your checking account. How do I pay the money back? As the borrower you are responsible for making the minimum payments each month.

You may incur higher annual interest rates on any unsecured credit cards and lines of credit if two minimum payments are not received by your payment due date within 12 consecutive months. This annual interest rate increase from your preferred annual interest rate can result in an increase in your monthly payments.

Paying off your only line of installment credit reduces your credit mix and may ultimately decrease your credit scores. Similarly, if you pay off a credit card debt and close the account entirely, your scores could drop.

You can use Interac e-Transfer^® in online or mobile banking to send money from your line of credit to another bank account.

Here's how it works: When you borrow money with a portfolio line of credit, you have to pay interest on the amount you borrow. The interest rate might change based on the current rate index. You have the flexibility to pay back the money at your own pace.