An equity line of credit is a financing mechanism where one can borrow funds using the value of an asset as security for the loan. This is an important method of raising funds for many businesses and organizations, and should not be taken for granted. The fact that this type of credit provides lower rates of risk for the lender means that it’s easier acquire. Maintaining an equity line is therefore a very good idea, as it ensures that one will have access to funds such as in cases of emergencies.
If you are interested in acquiring a loan through the use of an equity line, the asset or property that you are going to use has to have no outstanding loans or liens attached to it. Remember, the equity of an asset or a property refers to its market value less any debts that are attached to it. When applying for an equity line loan on such an asset, the bank may limit the amount you can borrow, or otherwise reject the application altogether.
In addition to that, you also have to know whether the asset can be used as equity. This usually depends on the bank you are working with. Most banks will have clear guidelines regarding the types of property or assets that they can use for equity line loans, so you need to be familiar with this prior to seeking one. Of course, you can also negotiate about the asset with the lender for better terms or higher loan limits.