How to get a line of credit for general purposes



From: Justin Jefferson

When I apply for a loan, it is usual for the lender to ask the purpose. I would like to know, what is it to them? I mean, if the capital is secured by a mortgage over sufficient real estate, and the repayments are secured, so far as they can be, by a secure income, then what does it matter what the purpose is?

Do lenders have a list of purposes they find acceptable? Or is the question in the discretion of the individual officer who has authority to approve the loan?
Last edited by a moderator:
Reply: 1
From: Rolf Latham

Hi Justin

They ask the question because it does affect the default risk,and whether or not the loan is covered by the Consumer Credit Code.

A line of credit used for core business funding usually has a different interest rate (note higher) and higher fees and charges.

A line of credit used for personal investment purposes is not covered by the consumer credit code whereas one used mainly for household or domestic purposes is.

In short, lenders ask all sorts of questions to protect themselves from default and to ensure they comply with the relevant laws.


Last edited by a moderator: