Line of Credit – A Quick Insight!

The Line of Credit (LOC) is a new concept in India but is fast emerging as a better alternative loan option for a large number of borrowers.

Easy accessibility, best interest rates and flexibility compared to other available options such as credit cards are some of the reasons contributing to surging popularity and acceptance of the Line of Credit.  

What is a Line of Credit?

A Line of Credit is a unique financial product where the financial lender extends a fixed amount of money to a borrower with the facility to withdraw as per your needs. A borrower only needs to pay the interest part of EMIs on the utilized amount. A borrower can repay the principal amount at the end of the loan period.

As a result, the Line of Credit concept has gained immense popularity in recent years among borrowers.

What is a Line of Credit used for?

A Line of Credit is a type of loan that financial institutions offer the customers to borrow or draw down, money for a particular purpose.

For example, if a borrower plans to remodel his/her house, home equity lines of credit will work fine because he/she will pay interest and fees only on the fund borrowed.  

How Does a Line of Credit Work?

A Line of Credit is a predetermined or pre-qualified credit line or limit extended to borrowers that they can use as per the needs.

Under a Personal Loan where interest calculates the entire loan amount, a Line of Credit only charges interest on the amount utilized and not on the full amount.

What’s more, the EMI only consists of the interest component of the used amount. The principal amount is due only at the completion of the loan duration.

Thus, the facility to pay the interests only on the amount utilized and not on the whole amount makes it easy for borrowers to opt.

Why Does a Personal Line of Credit Will Work For Borrowers?

A Line of Credit is sure to work its charm for borrowers because of its many features that will lure to opt for it instantly.

• Interest-Only EMIs

With a Line of Credit in action, a borrower only pays the interest part of the loan as the EMI. It means the monthly instalment can be 45% lower than the EMI on a term loan on a similar amount. As a result, savings and a better financial management are always available for the customer.

• Similar To Overdraft Facility

A Line of Credit is like the overdraft facility offered by banks and other financial institutions. Whenever there is a negative account balance, the bank comes to the rescue and covers the payments and charges a specified interest rate and also a fee for the overdraft service.

But, in the case of a Line of Credit, the fee is not charged and the interest rate remains moderately lower.

• Easy To Use

A borrower can use a Line of Credit just like normal or regular one – he/she can withdraw cash as per the needs and repay it as per their disposal. The simple application procedure offered by many financial institutions as well as various add-ons benefits makes it an obvious choice for financing needs nowadays.

• No Collateral Required

A Line of Credit is an unsecured loan and a borrower should not offer a security or collateral at the time of availing the loan. Most of the lenders determine your creditworthiness by studying the credit report.

As a result, as long as you have a good CIBIL score and if the profile meets the eligibility criteria specified by the lender, loan availing is a hassle-free process.

• No Part-Prepayment Limits

There is no limit on the number of part pre-payments that a customer can make on the Line of Credit. A majority of reputed financial lenders do not charge their customers for part-prepayments or draw downs that he/she makes.

Documents Required For Personal Line of Credit

• Financials – Salary Slips of Last 2 Months
• Bank Statements – Salary Account Bank Statement of The Last 3 Months
• Employment Proof – Employee ID Card
• KYC – Identity Proof – Passport/Voter ID Card/Driving License/PAN Card - Any one of the above
• Address Proof – Passport/Driving License/Ration Card/Latest Mobile bill/Letter from employer with HR/Admin sign – Any one of the above

How to Apply

Step 1: Fill the online form and submit it

Step 2: Get an instant approval. Opt for your required loan and duration

Step 3: A representative from the lender will contact you for document collection

Step 4: Money will be deposited in your account  

The Bottom Line

With so many discussed benefits of the Line of Credit facility working in the favor of the customers and with so little documentation and an easy applying process, it is generally very wise on the part of borrowers to go for it and plan their finances accordingly.

As you read this, a large number of customers are already opting for the Line of Credit facility (LOC) today because it has rapidly emerged as the preferred mode of financing and helping them save huge.

What’s holding you back? Enroll today - Apply Here

Also Read : 5 Questions To Ask Before Applying For A Personal Line Of Credit