The best way to describe a line of credit loan is to think about your mortgage being a big credit card.

You have a limit you can’t withdraw over and you the amount you draw down on correlates to the amount of interest you are charged.

To benefit from the line of credit, you can put your income directly into the home loan reducing the amount of interest charged [as home loan interest is calculated daily, charged monthly] and put all of your expenses on a credit card with a interest free period.

At the end of the interest free period the funds are taken from the home loan to pay the credit card balance. The benefit comes from leaving the funds for the 55 days in the home loan reducing the interest charged to the home loan.

As LOC generally attracts a higher interest rate, therefore this type of loan only suits the astute saver and clients that are prepared to make extra repayments and pay off their home loan quickly.