When it comes to borrowing money, there are plenty of options available to borrowers. You can approach banks, NBFCs for a traditional loan product, or pay a visit to your neighbourhood pawn shop (not that good an idea), borrow from your friends and family, or use credit cards (if you haven\u2019t maxed them out).<\/p>\n
One of the lesser used options is the LOC (Line of Credit). While the line of credit has been in existence for several years, they aren\u2019t as popular as loans. One main reason for this is that most banks and NBFCs, don\u2019t advertise LOC as they do other financial products.<\/p>\n
If you\u2019re hearing about LOC for the first time, then you\u2019ve come to the right place.<\/p>\n
What is Line of Credit?<\/strong><\/p>\n Simply put, it\u2019s a flexible loan available to both individuals and businesses. Just like a credit card offers you a particular amount of funds that you can use whenever you need it, an LOC is a specified sum of money, which you can access whenever required. You can then repay it immediately or over a period, according to your convenience.<\/p>\n Here are a few things that you must know about the Line of Credit to get a better understanding of them.<\/p>\n Unlike a loan, you don\u2019t pay interest for an LOC until you use it. Additionally, the loan amounts are usually provided to you as a one-time payment. On the contrary, you can use as little or the entire LOC amount based on your convenience.<\/p>\n Several NBFCs and a few banks offer a Line of Credit. You can even apply online for one.<\/p>\n Yes and No. The overdraft protection offered by banks is an automatic line of credit. If your account drops below the minimum balance, the bank makes the payments for you and then charge an interest along with an Overdraft fee.<\/p>\n With a Line of Credit, there are no fees, and the interest rates are often lower.<\/p>\n There are two major classifications: Secured and Unsecured. If you have availed loans, then you would be familiar with these two types. In secured, you submit collateral as a guarantee, whereas in unsecured there is no need for collateral.<\/p>\n The amount depends on several factors like your CIBIL score, credit history, repayment capacity, employment status, other loans you have availed and so on.<\/p>\n\n
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