Wells Fargo closed your private line of credit score. Now what do you do?


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Wells Fargo is closing all existing personal credit lines, CNBC reported Thursday. Some customers are probably thinking, what now?

Fortunately, according to financial experts, there are alternatives for customers looking for cash.

You can reach out to other lenders who offer personal lines of credit or personal installment loans. Homeowners may consider opening a line of credit for home equity, retirees savers could take out a 401 (k) plan loan, and those with certain types of life insurance could, for example, borrow against the policy.

Everyone has their own set of advantages and caveats, experts said.

“Every consumer will have different needs,” said Rachel Gittleman, manager of financial services and membership for the Consumer Federation of America, an advocacy group. “Make sure you can afford it on top of your usual monthly expenses.”

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A personal loan is a type of unsecured loan, which means it is not backed by collateral. It offers borrowers flexibility who can borrow money anytime after the line is set up.

The sums involved are typically modest and are often used for unplanned expenses or in other quick cash scenarios, such as quick capital for business ventures, according to Greg McBride, senior financial analyst at Bankrate.

Banks have also marketed them in other ways, such as home improvement loans, he said.

“For one it’s debt consolidation, for another it’s home improvement, for another it’s a jet ski,” said McBride.

Wells Fargo is closing all personal lines of credit in the coming weeks and is no longer offering the product, CNBC reported Thursday. The revolving lines of credit typically allow users to borrow $ 3,000 to $ 100,000.

“We recognize that change can be inconvenient, especially when customers’ creditworthiness is compromised,” said a Wells Fargo statement. “We offer 60 day notice with a number of reminders before closing and we are committed to helping each customer find a loan solution that suits their needs.”

Wells Fargo customers can take out personal lines of credit with other banks, McBride said. Many online lenders offer them and typically have a short turnaround time of 48 hours, he said.

“[Personal lines of credit] have been on offer for a long time, but it was never something the bigger banks were really committed to in a big way, “McBride said for the past 10 years or so.”

Personal loans, another type of unsecured debt, are also an option, he said. They’re a little less flexible than the line of credit because customers borrow all of the money up front and pay it back in regular monthly payments over a defined period of time, McBride said.

(Wells Fargo still offers personal loans and credit cards, according to company statements.)

No product will be perfect. But you’re more likely to make an informed decision.

Rachel Gittleman

Financial Services and Membership Outreach Manager at the Consumer Federation of America

Certified Financial Planner Paul Fremder, director of financial planning for ProVise Management Group in Clearwater, Fla., Has clients affected by the Wells Fargo account closures.

The foreigner suggested establishing a new banking relationship (recommends a community bank) and, if they are homeowners, apply for a line of credit for home equity loans. The process can take about six weeks, he said.

“The rise in home prices means many homeowners are sitting on more equity than they’ve ever seen,” said McBride.

Those who have cash value life insurance, such as a life insurance policy, may be able to borrow against the policy once it has accumulated cash value.

“That is the cheapest money there is,” said foreigner.

However, this option has some caveats and risks. On the one hand, the death benefit from the insurance policy is reduced by the loan amount and the interest if it is not repaid over the life of the owner.

Retirement savers may also be able to take out a loan from their 401 (k) plan, Fremder said.

This, of course, would reduce the size of their ultimate nest egg and draw money out of investments that are likely to grow thanks to the power of compound interest.

However, borrowers on the 401 (k) plan would essentially repay themselves, with interest. The repayment must be made within five years, but the terms may vary depending on the employer.

According to the Plan Sponsor Council of America, approximately 83% of the plans allow investors to borrow against their accounts. Almost all 401 (k) plans require a minimum loan amount. Around 75% set a minimum of $ 1,000, according to the council.

Creditworthiness and fees

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Wells Fargo customers whose credit lines are being closed should monitor their credit reports and creditworthiness, said Gittleman of the Consumer Federation of America. If available credit is drastically reduced in a short period of time, it can have a negative impact on creditworthiness, she said.

Customers who see a drastic change can file a complaint with the Consumer Financial Protection Bureau, she said.

Closing down any type of financial product could affect customers’ creditworthiness, a Wells Fargo official said. The company reports the account as closed by the bank. Customers should continue to make scheduled payments on time to ensure a positive credit report, the official said.

Consumers looking to replace a Wells Fargo line of credit with a different type of loan should make an informed purchase by checking product fees, Gittleman said. Reading through customer complaints in the CFPB database can help consumers understand product defects.

“It’s not just the APR,” she said. “There are monthly or yearly fees that are part of what you pay back.

“As a consumer, you have to make sure you can pay for this,” she added. “No product will be perfect.

“But you’re more likely to make an informed decision.”