Frequently Asked Questions About Credit

A line of credit is made available to you to use in any way you want. You set it up with an RBC Royal Bank credit specialist and then never need to apply again. As long as your account is in good standing and are not experiencing any debt-related problems, you will always be able to borrow up to your credit limit. You pay interest only on the amount you've borrowed — and you can borrow any part of your credit again once you have repaid it. For more information, see Royal Credit Line.

A personal loan is different because you receive the full amount of the loan when you're approved and start paying interest immediately on the full amount. You will have a set schedule of payments that will reduce your debt to a zero balance over an established timeframe (generally 1 — 5 years). For more information, see Royal Personal Loans.

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The equity in your home is the difference between the value of your home and the amount you still owe on it. At RBC Royal Bank, you can borrow up to 80% of the equity in your home - less any prior outstanding mortgages — by using it as security for a Royal Credit Line Secured home equity line of credit or for a Personal Loan.

You can use your equity to obtain a larger credit limit, at a lower interest rate, than you may be granted with other types of unsecured credit.

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Consolidation is often a wise option, especially if you have a good credit history. You'll have just one monthly payment and the peace of mind that comes with knowing you are reducing your overall debt load quickly and conveniently. In addition, consolidating may help reduce the total interest you pay, cutting your borrowing costs.

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One of the most convenient and effective ways to reduce or eliminate your debt load is to consolidate all your different borrowing solutions into a single personal loan. Combine your other loans, lines of credit, credit card balances and any other borrowing solutions into one loan, with a set schedule of payments. As a result, you will have only one payment to deal with and you will find it easier to pay off all your debt.

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When you co-sign a loan for a family member or friend, you are promising to pay the debt if they do not. In other words, if they stop paying for any reason, the lender can ask you to pay as much as the full amount owing. You should also know that as long as the borrower still owes money on the loan, your total debt service ratio may be affected, with the result that you may be able to borrow less for your own use.

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If you have trouble meeting your loan payments, you should probably consider consolidating all your debts into a single loan. You will then only have to worry about making one payment — and you could save on interest payments too. It is usually best to consider a personal loan with a set repayment schedule. This will ensure that you make regular payments and reduce or eliminate your debt load as quickly as possible.

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If you think you may be carrying more debt than you can comfortably manage, ask your financial institution or one of our credit specialists to do an assessment and help you draw up a plan to eliminate your debt.

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"Term" refers to the period of time for which the interest rate on a loan is guaranteed. "Amortization" is the length of time it takes to fully pay off a debt with an established repayment plan. For smaller credit options like personal loans, the term and amortization are often the same — for example, a loan with a 5-year term is likely to have a 5-year amortization. In contrast, a mortgage may have a 5-year term and 25-year amortization.

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