The average personal debt increased by 6% in 2012 to 27,485 per person, and many people chose to tackle it by taking credit lines in order to avoid the high interest rates that often come with credit card.
Interest rates are generally between 1% and 3% above the prime rate of the bank, against up to 28% for some large credit cards. However, the rates are variable and increase and decrease depending on the prime rate of the bank, so it is important to be aware of this variability.
There are two types of lines of credit for individuals: secured and unsecured
A secured line of credit is backed by CPG or the equity in your home. Secured lines of credit give you a higher limit and a lower interest rate because they reduce the risk for the bank. When people start to get overwhelmed with their credits, many people acquire what is called credit insurance.
Credit insurance is available to cover your credit payments in the event of an injury or death. You can buy it from the bank that loaned you the loan or from a company or insurance broker that can give you a better price. But should you really invest in a credit insurance policy? There are a few things you need to remember if you are considering taking a line of credit insurance that can greatly influence your decision.
1. The coverage is not portable : You can not move your insurance policy from one bank to another, so you will need to reapply for a line of credit to a new lender. And if your health has changed in the years since you bought the original policy, you can not benefit from the new policy.
2. Non-smokers and smokers pay the same price : With the individual life insurance, non-smokers receive a premium reduction against smokers, but this is not the case when it comes to credit insurance. The factors that influence the price of insurance are directly related to your current credit.
3. Preferential rates are not available : When buying life insurance, those with excellent health and excellent family health history would be eligible for preferential rates, which could result in savings up to 30% off your premiums. However, when buying credit insurance, your excellent health counts for nothing, and there are no discounts available.