When there is a financial crisis, people seek to receive money fast to deal with the problem. Banks and other financial organizations offer loans to those in financial hardship to satisfy this need. However, the traditional credit program has its drawbacks. Banks strictly enforce the minimal credit limit and below that they don’t offer. This indicates that even if the borrower does not require a specific amount, he should lend at the lowest rate advertised by the specific bank.
The borrower's main difficulty in such circumstances is the loan's monthly interest payment. Even if the borrower only uses a portion of the loan as needed, the bank charges interest on the entire amount, resulting in a huge interest rate that causes more cash troubles. To solve this problem, banks and NBFCs devised a simple solution known as a "line of credit". But what exactly does the line of credit mean, what are their types, and how is it beneficial? So much confusion, right? Stay tuned to this blog to get all the answers. Let’s dive in!
What is a line of credit?
What is a line of credit is the most common question among us. Well, a line of credit means a blessing for people who need financial aid from time to time. In this method, the borrower can request a specific loan from NBFC but is not required to withdraw the entire amount at once. Once the credit limit is approved you can withdraw any amount from your credit limit as per your needs. The best part is that you have to pay the interest only on the amount withdrawn and not on the complete approved limit.
Assume that the financial institution approves Rs.50,000 of the credit limit based on your request and you withdraw Rs.10,000 from the sanctioned funds to meet your needs. In such a case, you need to pay interest only on Rs 10,000.
What are the types of Line of Credit Loans?
There are two different kinds of lines of credit:
Secured Line of Credit - The secured line of credit means there is a need for collateral and due to this the interest rate is relatively low as compared to other loans available in the market.
Unsecured Line of Credit - The unsecured line of credit means there is no collateral required and due to this, the interest rates will be relatively high. The financial institutions offer loans on the basis of one’s credit score.
How does a line of credit work?
A line of credit means a continuous or revolving loan that allows business owners and working professionals to easily access funds to fulfill their financial needs, as opposed to most loans, which require you to borrow money that is meant to be paid back over a fixed period. The line of credit has become much more flexible. This allows you to withdraw funds as needed, and the available funds you can borrow again as needed.
What are the Advantages of Using a Line of Credit?
Imagine you are preparing to repair your home, but the costs suddenly rise. Instead of borrowing more, a credit line will serve as a safety net. You borrow only the money required for each step. Platforms like Viva Money offer up to 2,00,000 with a unique feature of 0% interest for up to 51 days. Get the app, fill in all the required details, and get approved for a credit limit. Now withdraw and use the amount as per your need. And when you return it, the fund is available again, allowing for further flexibility. Whether it's an unexpected expense or need, you can access cash without needing to reapply each time. Credit is more than just a loan; it represents financial independence and peace of mind when things become tough.
Things to know before Applying for a Line of Credit
Verify your credit score, monthly income, and interest rates prior to applying for the credit line. To get the best deal, compare lenders. Flexibility is offered by a credit line, but responsible usage is key to maintaining a good credit history and financial stability.
What are the Eligibility Criteria for a Line of Credit?
You can easily apply for a credit line if you fulfill these criteria:
Ensure you have all valid identification documents.
Make sure you have a stable income.
Maintain a strong credit score and a good credit history to improve approval chances.
How to apply for a line of credit?
Follow these steps to apply for a Viva Money- line of credit:
Download the Viva Money from the app store or Play store
Log in with your mobile number
Select your desired credit limit
Add your PAN & Aadhaar details and check your eligibility
Complete KYC verification
Get instant approval and access your credit line loan anytime
Wrapping Up:
To sum up, a line of credit is a flexible financial tool that lets you borrow as needed and pay interest only on what you use. It helps manage unexpected expenses without high monthly interest on unused funds. Platforms like Viva Money offer a credit line of up to ₹2 lakh with a 51-day interest-free period, giving you ample time to repay without extra costs. This added grace period ensures you can easily manage repayments, making Viva Money a hassle-free and convenient credit alternative for smarter financial planning.
