August 2000 Volume 81 Number 8 "serving the protectors"
Police Credit Union

Line of Credit

t is a fact that today the majority of Australians are working longer hours - with less recreation time - to achieve and maintain a certain lifestyle. A high-pressure existence minimizes the amount of time we have available to manage personal issues, such as banking and finance.

More recently, home loans have been a topic of much debate. While there are several types of home loans available, the trend today seems to be towards a product which enhances our lifestyle: a line of credit. A line of credit is simply a large overdraft secured by a mortgage over your property. Limits can be equivalent to 75% of the value of your home.

Flexibility is the key to this account. Your money is easily accessible through automatic teller machines, EFTPOS, cheque books, and over the counter. In addition, you can arrange to have your periodical repayments, and direct deducted monthly. Once the account is established, there are no ongoing account keeping fees.

Another feature of this product is that it can be offered as a split facility. For example, one limit may be established for personal use, such as home renovations, a holiday or vehicle purchase, while a separate limit may be set up for investment purposes such as property or share purchase. The investment account is then easily identifiable for accounting and taxation purposes.

However, the primary reason for changing to a line of credit is to reduce the term of your home loan, and minimize the interest you pay. This is achievable in the following manner.

First, ensure that all income received is credited directly to the line of credit, and then pay bills and expenses direct from this account. This will ensure that the balance is as low as you can make it at any given time, and that money you are not using is working for you. As interest is calculated daily, there are obvious benefits if it is calculated on a lesser balance.

Second, the line of credit needs to run in conjunction with a credit card which offers an interest-free period. Then, rather than accessing your funds directly from the line of credit, you could utilize your credit card for expenses. At the end of each month you then debit the line of credit once to pay off this balance. Paying by the due date ensures that you do not incur any interest on your credit card, but leaves the funds in your line of credit for an extra month, saving you on interest.

The Police Credit Union MyCard is a MasterCard which offers up to 55 days interest-free on purchases. The card can be personalized. For example, you can choose a photo of your pet, a family photo, or simply a photo of yourself.

To find out more about saving your money, reducing your home loan interest, and being rewarded for using a credit card, ring the Police Credit Union on 131 844. Fees and charges, terms and conditions, and normal lending criteria naturally apply.

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