5 ms·

You're better off to stay fully invested and keep a line of credit in place of an emergency fund.

matanshavit 5y ago
I'm having trouble finding a bank that still offers lines of credit. Do you have a particular recommendation that you are comfortable sharing? Thanks
- candiddevmike 5y ago
  Home equity line of credit (HELOCs) are pretty easy to get, assuming you have some equity built up in a home. Works like a credit card. The rising interest rates will make using it pretty painful though.
  - avgDev 5y ago
    It might be difficult to get a loan without a job.
    - candiddevmike 5y ago
      You get a HELOC when you have a job. It's good for X number of years at X rate for loaning up to X amount of money.
  - theandrewbailey 5y ago
    > Works like a credit card. The difference is that the metaphorical credit card of a HELOC has the house as collateral. A normal credit card has no collateral. If you go bankrupt, the HELOC takes the house, but the credit card doesn't.
  - matanshavit 5y ago
    Darn, I rent (in NYC). I'm still not sure if buying an apartment here is a good bet long term, but I do wish I had gotten in on something when prices weren't going so crazy. I would only consider it right now if I found an amazing deal. Either that or wait for something to change with the housing market. From what I can tell, though, things are just going to get harder for individuals who want to own a home in major cities.
    - candiddevmike 5y ago
      Talk to your politicians about banning or severely taxing non-primary resident single family homes. Affordable housing should be a right.
      - cperciva 5y ago
        Banning or severely taxing homes which aren't occupied by the owner means banning or severely taxing homes which are occupied by someone other than the owner... aka. rentals. Sure, you can make rental accommodation illegal if you want your community to consist solely of homeowners -- some HOAs do exactly this -- but it's the most vulnerable who will suffer under such a policy.
        candiddevmike 5y ago
        I don't agree. We're in a supply crunch right now, more houses == lower prices, and low income folks can always get government subsidized housing (or should demand more of it if none is available).
        cperciva 5y ago
        There's a supply crunch, sure. And if you reallocate from rental to owner-occupied, you reduce the crunch somewhat on that side... but you make the supply crunch even worse for renters. It's a popular policy decision for many politicians, since owners vote at much higher rates than renters; but I wouldn't call it good policy.
        notch656a 5y ago
        The 'most vulnerable' rarely are living in single family homes. They are living in either public housing, a trailer, or crammed into illegally over-occupied studios. That said putting more restriction on housing (even more taxes!) isn't going to improve the situation. Housing needs deregulation, not more regulation to distort the market even more.
  - deleted 5y ago
    [deleted]
- sethammons 5y ago
  Similar boat. I wanted a line of credit just to have it. With considerable equity in the house and savings and stock that exceeded the credit amount and with a high paying job and with excellent credit, the bank rejected my application. Apparently because I said I might use it for repairs at some point. Ffs.
- landa 5y ago
  I'm doing what the parent comment suggested. The line of credit should be margin - you borrow against your stocks. If you use Fidelity, you can call them and ask them to lower your interest rate, and it can actually get really low.
  - matanshavit 5y ago
    It does sound risky but that might be my best chance at this point, thank you. I'll see what kind of of rate I can get.
  - hackerfromthefu 5y ago
    So if the stocks really crash your LOC is eviscerated when you most need it.
avgDev 5y ago
This is terrible advice, and it seems you never went through a massive crash. Imagine, market crashes 50%, you lose your job, and what? Are you going max out your cards with 20%+ APR? Are you going to realize your losses? Emergency fund is there to help ride out bad times, so you don't have to take shitty jobs, realize losses in your investments, sell your home or not undergo medical treatment due to financial stress.
- mythz 5y ago
  > and what are you going max out your cards? No, that's what the line of credit is for. Maximizing your savings/investments isn't a bad approach when your young as every $ made ads cumulative value over time. I wouldn't recommend it when you have a family.
  - avgDev 5y ago
    Emergency fund should always be first but adjusted for your age and obviously cost of living. No kids and living with parents? Sure, invest anything you make.
  - gigaflop 5y ago
    I feel that having a certain amount of physical and liquid cash assets is almost mandatory for basic financial survival. I use credit cards for most purchases('selling' my data to the card companies for reward points, too), but cushioning matters. If life were 100% predictable, and I never had to worry about a sudden expense, or a bill being higher than expected, or gas/grocery prices rising, then I'd totally be down to invest my entire net worth and live off of a portion of my paycheck, maintaining minimum balance in my checking account, and sweating bullets whenever the market dips. I went through several weeks of unemployment last year while I was between jobs. I was fortunate enough to receive the covid+standard unemployment payments, but still had to supplement that with cash from my savings to skim by. The alternative would have been to break my lease to live with my parents, incur bad credit, potentially have my car repo'd, etc. It would have set me back several years, and wrecked my self image.
    - 5y ago
gunfighthacksaw 5y ago
What happens when the crash occurs and your bank nixes your line of credit? They are well within their right to, at least it says so in the fine print. Then you’re broke, and left holding a very baggy looking portfolio.
- Asparagirl 5y ago
  Yes, people seem to forget that HELOCs are usually callable too. If you have a $500k HELOC and have used $200k of it for something, the bank usually has the right to force you to start making principal repayments (not just interest), to change the interest rate, and/or even in extreme circumstances to “call” the loan and ask you to repay everything ASAP. Read your fine print.
  - gunfighthacksaw 5y ago
    That said (and this goes counter to my previous comment) I think HELOCs are probably the safest credit source, purely because if the banks started calling them there would be an economic meltdown. Obviously if you’re going to overleverage yourself, a HELOC makes the most sense because of low rates, so I’d assume anyone who is overleveraged is doing it through a HELOC. However, if you can get a HELOC, you own property and are therefore much better off and less precarious than people who don’t. Ceteris paribus, I’d rather lose my shirt in a house I own rather than a rental.
rich_sasha 5y ago
In general, you pay enormous interest on unsecured credit. House? Mortgages have single-digit interest. Car financing? More complicated, but often free, or even negative (I bought my car for less with financing that it would cost me outright). Credit card? Tens of %. I guess a "line of credit" is essentially the same as a credit card. A bank can in principle recover your credit card debt off your house, but it's difficult.

I'm having trouble finding a bank that still offers lines of credit. Do you have a particular recommendation that you are comfortable sharing? Thanks

candiddevmike 5y ago
Home equity line of credit (HELOCs) are pretty easy to get, assuming you have some equity built up in a home. Works like a credit card. The rising interest rates will make using it pretty painful though.
- avgDev 5y ago
  It might be difficult to get a loan without a job.
  - candiddevmike 5y ago
    You get a HELOC when you have a job. It's good for X number of years at X rate for loaning up to X amount of money.
- theandrewbailey 5y ago
  > Works like a credit card. The difference is that the metaphorical credit card of a HELOC has the house as collateral. A normal credit card has no collateral. If you go bankrupt, the HELOC takes the house, but the credit card doesn't.
- matanshavit 5y ago
  Darn, I rent (in NYC). I'm still not sure if buying an apartment here is a good bet long term, but I do wish I had gotten in on something when prices weren't going so crazy. I would only consider it right now if I found an amazing deal. Either that or wait for something to change with the housing market. From what I can tell, though, things are just going to get harder for individuals who want to own a home in major cities.
  - candiddevmike 5y ago
    Talk to your politicians about banning or severely taxing non-primary resident single family homes. Affordable housing should be a right.
    - cperciva 5y ago
      Banning or severely taxing homes which aren't occupied by the owner means banning or severely taxing homes which are occupied by someone other than the owner... aka. rentals. Sure, you can make rental accommodation illegal if you want your community to consist solely of homeowners -- some HOAs do exactly this -- but it's the most vulnerable who will suffer under such a policy.
      - candiddevmike 5y ago
        I don't agree. We're in a supply crunch right now, more houses == lower prices, and low income folks can always get government subsidized housing (or should demand more of it if none is available).
        cperciva 5y ago
        There's a supply crunch, sure. And if you reallocate from rental to owner-occupied, you reduce the crunch somewhat on that side... but you make the supply crunch even worse for renters. It's a popular policy decision for many politicians, since owners vote at much higher rates than renters; but I wouldn't call it good policy.
      - notch656a 5y ago
        The 'most vulnerable' rarely are living in single family homes. They are living in either public housing, a trailer, or crammed into illegally over-occupied studios. That said putting more restriction on housing (even more taxes!) isn't going to improve the situation. Housing needs deregulation, not more regulation to distort the market even more.
- deleted 5y ago
  [deleted]
sethammons 5y ago
Similar boat. I wanted a line of credit just to have it. With considerable equity in the house and savings and stock that exceeded the credit amount and with a high paying job and with excellent credit, the bank rejected my application. Apparently because I said I might use it for repairs at some point. Ffs.
landa 5y ago
I'm doing what the parent comment suggested. The line of credit should be margin - you borrow against your stocks. If you use Fidelity, you can call them and ask them to lower your interest rate, and it can actually get really low.
- matanshavit 5y ago
  It does sound risky but that might be my best chance at this point, thank you. I'll see what kind of of rate I can get.
- hackerfromthefu 5y ago
  So if the stocks really crash your LOC is eviscerated when you most need it.

avgDev 5y ago

This is terrible advice, and it seems you never went through a massive crash. Imagine, market crashes 50%, you lose your job, and what? Are you going max out your cards with 20%+ APR? Are you going to realize your losses? Emergency fund is there to help ride out bad times, so you don't have to take shitty jobs, realize losses in your investments, sell your home or not undergo medical treatment due to financial stress.

mythz 5y ago
> and what are you going max out your cards? No, that's what the line of credit is for. Maximizing your savings/investments isn't a bad approach when your young as every $ made ads cumulative value over time. I wouldn't recommend it when you have a family.
- avgDev 5y ago
  Emergency fund should always be first but adjusted for your age and obviously cost of living. No kids and living with parents? Sure, invest anything you make.
- gigaflop 5y ago
  I feel that having a certain amount of physical and liquid cash assets is almost mandatory for basic financial survival. I use credit cards for most purchases('selling' my data to the card companies for reward points, too), but cushioning matters. If life were 100% predictable, and I never had to worry about a sudden expense, or a bill being higher than expected, or gas/grocery prices rising, then I'd totally be down to invest my entire net worth and live off of a portion of my paycheck, maintaining minimum balance in my checking account, and sweating bullets whenever the market dips. I went through several weeks of unemployment last year while I was between jobs. I was fortunate enough to receive the covid+standard unemployment payments, but still had to supplement that with cash from my savings to skim by. The alternative would have been to break my lease to live with my parents, incur bad credit, potentially have my car repo'd, etc. It would have set me back several years, and wrecked my self image.
  - 5y ago

gunfighthacksaw 5y ago

What happens when the crash occurs and your bank nixes your line of credit? They are well within their right to, at least it says so in the fine print. Then you’re broke, and left holding a very baggy looking portfolio.

Asparagirl 5y ago
Yes, people seem to forget that HELOCs are usually callable too. If you have a $500k HELOC and have used $200k of it for something, the bank usually has the right to force you to start making principal repayments (not just interest), to change the interest rate, and/or even in extreme circumstances to “call” the loan and ask you to repay everything ASAP. Read your fine print.
- gunfighthacksaw 5y ago
  That said (and this goes counter to my previous comment) I think HELOCs are probably the safest credit source, purely because if the banks started calling them there would be an economic meltdown. Obviously if you’re going to overleverage yourself, a HELOC makes the most sense because of low rates, so I’d assume anyone who is overleveraged is doing it through a HELOC. However, if you can get a HELOC, you own property and are therefore much better off and less precarious than people who don’t. Ceteris paribus, I’d rather lose my shirt in a house I own rather than a rental.

rich_sasha 5y ago

In general, you pay enormous interest on unsecured credit. House? Mortgages have single-digit interest. Car financing? More complicated, but often free, or even negative (I bought my car for less with financing that it would cost me outright). Credit card? Tens of %. I guess a "line of credit" is essentially the same as a credit card. A bank can in principle recover your credit card debt off your house, but it's difficult.