# If I quit job, will bank demand repayment of line of credit?



## Ronny T (Nov 29, 2017)

Hi there, 

I am considering quitting my job to travel for a few months before starting my own business (start-up costs will be very low). I currently have a line of credit with ~$25,000.00 outstanding. Will the bank notice the lack of employment income deposits in my account and move for full repayment of the line of credit? It's a personal line of credit with standard terms including bank rights to demand repayment of outstanding balance at anytime. 

How closely do banks monitor account activity? Will they even notice lack of employment income deposits? or do they only monitor to ensure minimum payments are being met? 

Currently I'm paying interest only and my plan is to transfer ~$5,000.00 to my chequing account to fund the trip (3-4 month trip). 

If anyone has experience working with a bank and can comment on this it would be greatly appreciated! 

Thanks!


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## Mortgage u/w (Feb 6, 2014)

Banks do not follow your employment activity. All they care is that your loan payments are made on time.


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## Userkare (Nov 17, 2014)

Check the terms of the line of credit agreement. It probably has a clause that states you must notify them of any change in your financial situation.

From ScotiaBank...

_Credit Information
You agree to furnish us with annual financial statements and other information from time to time (a minimum of at least
once a year) at our request. *You are required to notify us in writing of any material change in your financial condition.* You
will give the Bank such financial statements and information as the Bank may from time to time request in writing for the
purpose of keeping your file up to date or complying with any regulatory requests. You authorize us to furnish information
concerning your performance under this Agreement to third parties, including credit reporting agencies and our affiliates_

_In the case the Account is unsecured, secured by personal property or secured by real property which is not your home, in
addition to the above reasons, we may consider you to be in default if:
¨ you exceed your Credit Limit.
¨ you fail to comply with the terms of this Agreement.
¨ *we obtain information that causes us to believe that you may be unwilling or unable to pay your debts to
us or to others on time.*
¨ you file for bankruptcy.
¨ you become incapacitated or in the event of your death.
¨ a judgment is rendered against you.
¨ breach of terms of workout or temporary hardship arrangement.
If we consider the Account to be in default for any of the above stated-reasons and your Account is unsecured, secured
by personal property or secured by real property which is not your home, we may close the Account without notice and
require you, your estate or personal representative to pay your outstanding balance immediately. We may also require
you to pay interest at the Penalty Rate shown on the Rates and Fees Table or in a separate document, reduce your Credit
Limit, increase your Minimum Payment, or take any other actions permitted by law or this Agreement. To the extent
permitted by law, if you are in default because you have failed to pay us, you will pay our collection costs, attorneys' fees,
court costs, and all other expenses of enforcing our rights under this Agreement._

So... I don't think they would have any reason to demand full payment as long as you're making the minimum payment; they love people that do that. But be damn sure that you do pay that on time.


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## gardner (Feb 13, 2014)

Yes. They undoubtedly asked you where you worked and how much you made when you set up the load, and changes to that situation would undoubtedly be material changes from the lender's perspective. They *might* not demand the loan immediately, but my guess is that they would for sure if they worked out you were unemployed for themselves rather than a voluntary disclosure.


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## OnlyMyOpinion (Sep 1, 2013)

Welcome to CMF Ronny!

Let me see if I have this right:
-you owe $25,000 on a line of credit
-you only pay the required monthly interest on it now
-you are going to increase that loc to $30,000 owing 
-then you are going to quit your job and travel for 4 months 
-in 4 months when you return, you are going to start your own business which will require very little start up costs

We know very little about your overall circumstances, do you have assets and savings? What source will you use to pay the minimum on your loc for the 4 months you are traveling? 
Most importantly, don't you think it would be prudent to pay off your debts and 'clean the slate' as it were before you quit your job, go into travel spending mode, and try to start a new business?


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## lonewolf :) (Sep 13, 2016)

If I owed on a line of credit taking a trip would be the last thing on my mind not quitting my job would be the first. If was going to go in business esp owing money on a line of credit would do a business that never cost money & still allowed me to keep my job until more established.


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## Mechanic (Oct 29, 2013)

I suggest you ask your account manager at the Scotiabank. Doesn't matter what anyone tells you here, it's your situation and relationship with Scotia that will matter. Personally, taking 3 months of with debt would be the last thing on my mind.


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## Mukhang pera (Feb 26, 2016)

Without presuming to pronounce upon the wisdom of what you propose, I tend to agree with Mortgage u/w. The bank wants to see the debt serviced. If all is on track on that score, all should be well.

Mechanic's advice has a certain appeal. But, if you spill the beans to the bank, the bank might then feel obliged to call the loan. It will then have specific knowledge that its security might be at risk. Certainly I can see the bank pulling the plug if, indeed, the credit line agreement carries terms such as those laid out by Userkare. In that situation, were I your account manager, I would be calling in the loan to cover my own butt. If the manager does nothing and you default, said manager might be called upon by a superior to explain why nothing was done when the manager became endowed with knowledge of your changed situation. 

My own experience squares with what Mortgage u/w said. I have had lines of credit - both secured and unsecured - and gone off, out of the country even, for extended periods with no apparent income. Nothing was ever said or done. Any payments that needed to be made were made. 

Userkare provides good advice in saying "Check the terms of the line of credit agreement." If it carries no requirement to provide the bank with updated information as to your employment/income/ financial status, then you should be good to go. In the end, what was agreed in writing will carry more weight than the collective wisdom of this forum as well as any words your account manager might utter.


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## Jimmy (May 19, 2017)

No.

I went through that exact same scenario w a TD HELOC. I was unemployed after getting the LOC. They will not check your employment status after it has been approved. They will if you want to make any changes like increase teh amount
I had a mortgage too and renewed it also w no headaches


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## Ronny T (Nov 29, 2017)

OnlyMyOpinion said:


> Welcome to CMF Ronny!
> 
> Let me see if I have this right:
> -you owe $25,000 on a line of credit
> ...


Thanks for the welcoming! I understand my plan doesn't sound prudent at all, but I've got a skill set that is sought after, and if I fail I fail. I'm not that worried. 

This is the first LOC I've had. I'm not sure if my payment process is normal, but the bank just the adds the minimum payment amount each month to the amount outstanding. On my end I do not actually have to facilitate payment. So when I transfer the $5,000.00 over to fund my trip it will just result in higher amounts being added each month to the outstanding balance. 

Anyway thanks for your comment!


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## Ronny T (Nov 29, 2017)

Ronny T said:


> Thanks for the welcoming! I understand my plan doesn't sound prudent at all, but I've got a skill set that is sought after, and if I fail I fail. I'm not that worried.
> 
> This is the first LOC I've had. I'm not sure if my payment process is normal, but the bank just the adds the minimum payment amount each month to the amount outstanding. On my end I do not actually have to facilitate payment. So when I transfer the $5,000.00 over to fund my trip it will just result in higher amounts being added each month to the outstanding balance.
> 
> Anyway thanks for your comment!


Actually I'm mistaken. There is a preauthorized payment the runs each month, but it usually doesn't come to that, as I usually make more than the minimum payments just from moving funds around.


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## redsgomarching (Mar 6, 2016)

So let me get this straight....you are quitting your job to go into more debt...debt that you are paying back by using the actual debt service the interest only payment......

good luck with whatever you are trying to do here.


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## Just a Guy (Mar 27, 2012)

Ronny T said:


> Actually I'm mistaken. There is a preauthorized payment the runs each month, but it usually doesn't come to that, as I usually make more than the minimum payments just from moving funds around.


So, are you thinking that, by borrowing more money to make a bigger repayment on the borrowed money you just borrowed you are actually doing something good?


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## Mortgage u/w (Feb 6, 2014)

Ronny T said:


> Thanks for the welcoming! I understand my plan doesn't sound prudent at all, but I've got a skill set that is sought after, and if I fail I fail. I'm not that worried.
> 
> This is the first LOC I've had. I'm not sure if my payment process is normal, but the bank just the adds the minimum payment amount each month to the amount outstanding. On my end I do not actually have to facilitate payment. So when I transfer the $5,000.00 over to fund my trip it will just result in higher amounts being added each month to the outstanding balance.
> 
> Anyway thanks for your comment!





Ronny T said:


> Actually I'm mistaken. There is a preauthorized payment the runs each month, but it usually doesn't come to that, as I usually make more than the minimum payments just from moving funds around.


You should look up the definition of Kiting because what you are doing can be viewed as such.


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## Ronny T (Nov 29, 2017)

It doesn't matter what it might be "viewed" as if it is not actually that thing. In Canada it is certainly not unlawful or criminal to do what I suggested.


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## redsgomarching (Mar 6, 2016)

you are living off of your line of credit and want to go on 4 months worth of vacation purely on debt.....

i hope procreating is not in your future endeavours. maybe after a few back hands from authority figure...just maybe...


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## redsgomarching (Mar 6, 2016)

you are living off of your line of credit and want to go on 4 months worth of vacation purely on debt.....

i hope procreating is not in your future endeavours. maybe after a few back hands from authority figure...just maybe...


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## Mortgage u/w (Feb 6, 2014)

Ronny T said:


> It doesn't matter what it might be "viewed" as if it is not actually that thing. In Canada it is certainly not unlawful or criminal to do what I suggested.


I'm no lawyer so I cannot tell you how the law will view this.

BUT I CAN tell you that it's not viewed well from a credit perspective. I can also tell you that given your future plans, your credit will eventually suffer, hindering you from obtaining additional credit. Keep in mind; Insurers, Utility companies, Cell phone companies, Employers and of course credit/mortgage lenders will look at your credit activities. If they don't like what they see, you can find yourself jobless and on a permanent vacation.

Once again, good luck!


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## Ronny T (Nov 29, 2017)

Mortgage u/w said:


> I'm no lawyer so I cannot tell you how the law will view this.
> 
> BUT I CAN tell you that it's not viewed well from a credit perspective. I can also tell you that given your future plans, your credit will eventually suffer, hindering you from obtaining additional credit. Keep in mind; Insurers, Utility companies, Cell phone companies, Employers and of course credit/mortgage lenders will look at your credit activities. If they don't like what they see, you can find yourself jobless and on a permanent vacation.
> 
> Once again, good luck!


I understand what you are saying, but in what I described I'll never miss any payments. Will my credit still suffer? I ask sincerely. I don't know the answer. 

As it stands now I've been told I have a good credit score (always make payments on time) and debt is slowly decreasing. If I were to transfer money to fund the trip my overall debt would increase but payments would still be made. 

4-5 months later I would return. The interest cost over these 4-5 months would be roughly $500. Shitty to pay interest but it's a means to an end. Upon returning I'd start my business. As mentioned start-up costs would be very low and I expect revenues would be quite healthy.


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## birdman (Feb 12, 2013)

In answer to your original question: "Not Likely"


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## feetfats (Jan 3, 2013)

Ronny T said:


> Upon returning I'd start my business. As mentioned start-up costs would be very low and I expect revenues would be quite healthy.


Have you ever started and operated a successful company before? I feel you may be heading towards some nasty life lessons here.


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## humble_pie (Jun 7, 2009)

Ronny T said:


> This is the first LOC I've had. I'm not sure if my payment process is normal, but the bank just the adds the minimum payment amount each month to the amount outstanding. On my end I do not actually have to facilitate payment. So when I transfer the $5,000.00 over to fund my trip it will just result in higher amounts being added each month to the outstanding balance.




i don't believe you have properly figured out yet how to exploit this situation.

since you don't have to make any payments - the bank is simply adding each month's interest to the aggregate amount due on the loan - the goal should be to run the aggregate payment up to the max, then abscond permanently.

never mind dithering out of town with a mere $25,000. How about keeping the job for the nonce, while working the debt aggregate up to $250,000. All the while, you will be depositing the excess borrowed funds in some kind of bank located in the shangri-la of your dreams (try to obtain a coded bank account, or even a fake name, for the overseas account.)

at 250k or 500k debt, you can skip town comfortably. No need to return ever. Certainly no need to worry about the original debt. You say your skill sets are rare & sought-after, so likely you can set up in shangri-la to carry on with your trade.

there are movies based on this script. Good luck.


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