Benefits of Line of Credit over Personal Loan & Credit Card!

Oct 27, 2023

Personal loans, lines of credit & credit cards are three ways to lend money that are commonly used these days. Among the three the Line of Credit or Credit Line is the newest one. The most common feature is, all these ways of lending money don’t require any collateral. Despite this, they are functionally different. A personal loan provides a lump sum of money upfront, and you need to make fixed monthly payments over the loan term. In contrast, a personal line of credit and credit card allows you to withdraw funds as needed, with the flexibility to repay on your own schedule and with a variable interest rate.

Although there are some similarities between the three ways of lending money, there are some additional benefits of a personal line of credit loan that often remains unnoticed.

What is a line of credit?

The line of credit meaning is something different than you have thought of. A Line of Credit or Credit Line is a preset flexible loan that allows you to borrow multiple credit lines at the same time within the limit. And the best part is that you only pay interest on the borrowed amount. As it is a revolving process, every time the borrower makes a payment, the total approved limit gets approved. A Line of Credit is a contractual agreement between a Financial Organization and a customer, setting the maximum amount the user can borrow as credit. The approved limit of an instant line of credit loan can range from as little as ₹2000 to as high as ₹10,00,000, depending on the organization and the borrower’s CIBIL score. Nowadays, obtaining a line of credit loan is remarkably convenient with a straightforward online process that requires zero documentation.

Types of Line of Credit that are available in the Market:

There are multiple types of Line of Credits, here are some of the Line of Credits Loans that are currently available in the market:

There are two types of line of credit Online Personal Loan – Secured line of credit & Unsecured line of credit.

Secured Line of Credit:

A secured line of credit requires collateral, such as a savings account, certificate of deposit, or other valuable asset, to back the credit line.

Unsecured Line of Credit:

An unsecured line of credit does not require collateral, but it typically comes with little higher interest rates compared to secured lines of credit.

Below are some of the more examples of different types of secured and unsecured instant line of credit loans:

Personal Line of Credit:

As the name suggests, a personal line of credit online personal loan is unsecured and can be used for various personal expenses, such as home improvements, medical bills, or any unexpected expenses.

Home Equity Line of Credit (HELOC):

Home equity lines of credit allow homeowners to borrow against their home equity for major expenses such as home renovations or debt consolidation.

Business Line of Credit:

A business line of credit provides access to funds for working capital, cash flow management, inventory purchase, or other business-related expenses.

Benefits of a Line of Credit over Personal Loan or Credit Card:

Flexibility:

Instant line of credit online offers better flexibility as compared to a personal loan or credit card. In a Line of Credit loan, you can borrow funds as needed depending on the approved credit limit. Where else in a personal loan you’ll get a lump sum amount in which you need to pay the fixed interest rates. Although credit cards also provide the same features, still you’ll get more options as well as a feature called a grace period, which we’ll discuss later in this blog.

Lower interest rates:

Lines of credit online personal loan typically have lower interest rates as compared to Personal Loan interest rates & credit cards interest rates, making them more cost-saving when it comes to borrowing money. Personal loans may have fixed interest rates, whereas lines of credit may offer variable rates, which can be beneficial during periods of low-interest rates.

No cash withdrawal fees:

An instant line of credit online allows borrowers to access cash without incurring additional fees, unlike credit cards, which usually charge cash advance fees and higher interest rates.

Revolving Line of Credit:

As similar to credit cards, lines of credit are also revolving, which means as the borrower repays the borrowed amount, the amount gets restored to borrow again. This ongoing access to funds can be beneficial for unexpected financial needs.

Grace Period:

It refers to the period during which borrowers are not required to pay any interest or additional charges if they fully repay the borrowed amount. This unique feature effectively transforms the line of credit loan into an interest-free loan. The length of the grace period can range from 30 to 51 days, depending on the lending institution you choose for the loan. It makes the line of credit a great choice if you want to opt for an interest-free loan.

Better for ongoing expenses: The line of credit online personal loan is ideal for unforeseen or ongoing expenses. If you’re renovating your home, for example, and have to pay multiple contractors, you can use the line of credit as a continuous source of funding.

Smoother Application Process: As compared to Personal loans and credit cards, the application process for a line of credit is much smoother. Finding the banks with the lowest interest rates, finding hidden charges, etc. can often be difficult when applying for a credit card or personal loan. Where else it is very easy to apply for an instant line of credit loan. All you need to do is to download the VIVA Money App and complete the registration. After that, you can select the desired credit limit, the loan application can be approved in less than 15 minutes, it is that easy!

Potential for higher credit limit: The credit limit on a line of credit loan is often higher than that of a credit card, which can be beneficial if you need to access a large amount of money.

Flexible EMI tenure: For the ease of access, selecting and changing the EMI tenure is much easier in line of credit loan, compared to traditional personal loans and credit cards. Maybe some of the charges can be there in both of the cases.

In conclusion, for all these factors, a Persona Instant line of credit online Loan can be a good choice to fulfill your credit needs. But It’s important to note that while lines of credit have these advantages, they also require responsible financial management. If not managed carefully, they can lead to debt accumulation and financial difficulties. To maintain a good credit score it is always suggested to repay the borrowed amount on a timely basis.