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Line of Credit Payments

It is vital that you make the payments to pay off any lines of credit that you have. Making line of credit payments in full and on time will save you grief and money in the long run.

The main reason you should make line of credit payments is that you pay interest on a line of credit. This means that the balance of your line of credit will increase in size as long as it is unpaid. The longer you delay payment the more you will have to payback in the long run. Interest accruing on a line of credit will increase its size over the long run.

The other reason why you should make line of credit payments is that every time you make a line of credit payment you increase the amount of credit available to you. The amount of credit available to you is determined by a set limit and your payments.

If you have a $50,000 line of credit and owe $25,000 on it you would only have $25,000 in credit available. If you made $5,000 worth of payments on that line of credit you would have $30,000 in credit available.

Line of Credit Payment Plan

A good way to make sure your line of credit gets paid off is to create a line of credit payment plan and stick to it. The way to do this is to look at your future income projections and create a budget based on them and your expenditures. This budget should tell you how much you can pay back on your line of credit.

You should try and a make the payments as big as you can because paying off the line of credit will make more credit available to you. If possible double or triple the payments so that you can have more credit available in the future.

When you do pay off a line of credit try and give yourself an operating reserve. That is a pool of cash available to cover unforeseen expenses so you won’t have to use the line of credit in the future. A good rule of thumb is to always assume that you will need 5% more than your expenditures when creating a budget.

Line of Credit Payment Strategies

Creating a line of credit payment strategy can also help you pay off your line of credit and increase the amount of credit available. A good basic strategy would be to payoff higher interest lines of credit such as credit cards first then pay off lower interest lines of credit like equity loans. Paying off high-interest lines of credit first can save you hundreds or thousands in interest payments.

Another good strategy is to use funds from a lower interest rate line of credit to pay off balances on higher interest lines of credit. For example use your home equity line of credit to pay off your credit card balances. This could reduce your line of credit payments because it reduces the interest you pay on them. 

Paying off low interest lines of credit balances when you have extra cash available is always a good idea. Doing this can enable you to have a line of credit available to cover emergency expenses in the future.

Businesses that operate in unstable industries would be well advised to follow this strategy.

Line of Credit Payments

Paying off a line of credit early always pays dividends to businesses and individuals. Those who are willing to make line of credit payments in full and on time will never regret the decision.