A line of credit makes a lot of sense even if you don’t plan on using it right away. I recently got a call from a very close previous colleague of mine that I worked with in a very different industry. I was surprised to hear that he had been let go after about 8 years of service. He was a high ranking corporate leader and had earned a high income while working for this company.
He wasn’t let go because if incompetence, tardiness or any for any other reason that one might conclude. He was terminated because the industry he worked in had changed substantially and his high income was no longer cost effective. He did receive a severance but it was not what he expected and he is refuting the amount he is entitled to which brings me to the point of why a line of credit makes sense.
My friend who enjoyed a fairly good lifestyle was not a huge saver. He owns a home with a fair bit of equity but outside of his regular RSP contributions he does not have a lot of cash flow around. That being said he was faced with a conundrum.
The industry that he worked in had changed as they often do and the prospect of finding a job in that industry that was reflective of his old salary was almost impossible to find and accepting the severance he was offered seemed unjust after he had consulted a lawyer. With no cash flow available how was he going to survive while disputing his severance? This was the question he hit me with. I pondered it for a few moments and the answer was simple: a line of credit. He had tons of equity but the problem was he didn’t have the foresight to get the line of credit in place before he lost his job
The old adage is that hindsight is 20/20 and it is definitely true in this case. Unfortunately, despite his equity we were unable to secure him a line of credit but fortunately he had sufficient equity that we got him an equity loan in the form of a second mortgage that would afford him the time and cash flow to properly dispute his severance.
Looking back over the past decade I can’t reiterate how important it is to hope for the best but prepare for the worst and this is why a line of credit makes perfect sense. Of course you can use them to renovate your home or pay for unexpected car repairs but they offer a great sense of security in the event of illness or job loss.
So be proactive and get some security in place, it’s just a phone call away and if for some reason you didn’t have the chance or the foresight to get one in place and you are experiencing financial difficulty don’t fret you still have options. Pick up the phone and give us a call and we can help make sense of it all for you.