Avoid a "Bad" Surprise; Cancellation of Your Line of Credit
As our economic "melt down" continues (stock market hit the 7000 mark) the financial institutions are rolling our their next phase of their strategy and that is to further reduce their liaibilities in the area of "real estate" collateral. It has already started in that people/small businesses are finding out that their lines of credit; that they thought they could rely on as their "safety net", are not being renewed. To further complicate this issue, obtaining new credit today just about requires an act of God and I am not sure he would qualify.
There appears to be a potential strategy behind pulling some of these renewals even for highly qualified people/businesses and the reason is quick & easy...let me explain. Good hard working/bill paying people who have a "0" balance on their lines of credit may be a target because of ease & quickness. When your line (note) is not renewed, any debt/note is due immediately. If there is a "0" balance, they don't have to try and collect funds (repay note) from individuals who don't have it - a quick and easy way to clean up their balance sheets but it leaves many good people & businesses hanging.
A strategy that has been suggested is to draw X amount on your line and sock it in the bank for X time but make sure you make timely payments & maybe even a few dollars more - you get bonus points for that. This gives you access to the cash quickly but also may push you down the list for cancellation if your line would need to be collected - which is very bad PR for them today. Obviously, keep in mind that the note can be called at any time.
Another option is to refinace your home but try and transfer some of the assests into cash now and sock it in the bank. Unforunately, it may be to late but may be worth investigation.
If nothing else, talk to your banker and try to get a better handle of what lies ahead for you and if there are any options availble to keep that line in place. If your past payment /borrowing history has blemishes...it seems logical that you may be on the radar screen for the next round of cuts and should start planning NOW just in case.
Remember that your private banker is caught between the rock & the hard place themselves and most will help as much as they can because they do want to keep you as a customer.
The worse thing you can do - is nothing and get a BIG BAD surprise!
