A line of credit loan allows you to access equity on your home or property. The amount you can borrow is pre-approved by the lender and you are required to pay interest only repayments as soon as the money is borrowed. Even though this type of home loan is not that popular among borrowers, it does offer the flexibility of having money available when you need it and repay it when you can.

Advantages:

• Rates are usually lower than personal loans.
• Flexibility of using the money only when you need it.

Disadvantage:

• Equity may reduce without principal repayments.
• Principal will not reduce during the interest only period.
• Payments will increase at the end of an interest only period.
• A borrower may spend extra money instead of investing, saving or reducing existing debt.