What is a Line of Credit? All you Need to Know Before Applying

Nov 17, 2023

In today’s first-paced world having financial flexibility is a crucial aspect of everyone’s life. Whether you need funds for any medical emergencies, home improvements, or for further studies. Line of Credit is one of the tools that give you the financial flexibility to tackle these situations or fulfill urgent requirements.

What is a Line of Credit Loan?

In today’s era, it is quite important to understand the line of credit meaning. Line of Credit (LOC) or Credit Line is a preset flexible loan that allows a user to borrow multiple credit lines at the same time within the limit. As it is a revolving process, every time the borrower makes a payment, the same amount gets restored to the credit line.

A Line of Credit is a mutual agreement between the Financial Organization and the customer establishing the maximum loan amount the user can borrow as the credit line. An approved limit of a line of credit can be as low as ₹2000 or it can be as high as ₹10,00,000 depending on the organization and the CIBIL score of the borrower. With zero documentation and an easy online process nowadays it is very easy to take a line of credit loan through different instant credit line apps.

What are the Key Benefits of a Line of Credit?

Line of Credit Instant Personal Loans offers several advantages, and here are some key benefits they provide:

Flexibility:

A line of credit is more flexible as compared to any other loan. With a traditional loan, the user gets a lump sum amount where a line of credit allows borrowers to access funds as needed, up to the approved credit limit. The borrower can repay the amount and can get access to the full approved limit and borrow funds as required.

Grace Period:

Grace Period is one of the highlighted features of a Line of Credit Loan. A Grace Period is the time or duration in which if the borrowers repay the complete borrowed amount then he doesn’t need to pay any interest or any additional charges. This feature makes the line of credit an interest-free loan. The duration of a grace period can be from 30 days to 51 days depending on the organization from which you are opting for the loan.

Revolving Line of Credit:

Usually the credit lines are 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.

Interest on Borrowed Amount:

With a credit line loan, the interests are only calculated on the borrowed amount and not on the actual approved credit limit. So you pay interest only on the amount withdrawn. This unique feature makes the credit line loan much more advantageous than the traditional loan since the borrower can save some money since the interest accrues on the entire loan amount in a traditional loan.

Versatile use:

Credit line loans can be used for a wide range of purposes, from covering any urgent medical expenses, education expenses, or maybe to cover any other personal expenses. A personal line of credit can give anyone the financial freedom that everyone needs.

Improved Credit Score:

Responsible management of a line of credit loan, including making timely payments and keeping credit utilization low, can have a positive impact on your CIBIL score or credit score. A strong credit score can lead to better borrowing terms and rates in the future.

Easy EMI Options for Repayment:

In a Credit Line loan, if you do not want to repay the total borrowed amount at once then you can opt for flexible EMI options. You can select your desired EMI tenure and can repay the loan accordingly. It will be good to check all the interest rates and other terms before opting for the EMI.

As now, we know what is a line of credit, It’s important to note that while credit line loans offer many benefits, they also come with responsibilities. It’s crucial to use your credit line wisely, make timely payments, and avoid overextending yourself financially to fully enjoy the advantages while minimizing potential drawbacks.

Eligibility Criteria for a Line of Credit Loan:

Before applying for a Line of Credit Loan, you should always check the eligibility criteria of the credit line. The eligibility criteria may include different factors such as credit score, income of the applicant, total household income, employment history, and several documents such as – Basic identifications – Adhaar card, PAN card, etc. The verification of the eligibility criteria often happens online. So you can check your eligibility criteria online.

How to Apply for a Line of Credit Loan?

In today’s world applying for an instant credit line is as easy as placing an online order. You can apply for a line of credit loan through any of the instant credit line apps. Different apps often offer different unique features. At VIVA Money, the Grace Period is 51 days, which means if you repay the amount- within the grace period then you don’t need to pay any additional interest or other charges. This unique feature makes the line of credit loan an interest-free loan.

You can apply for an Instant Credit Line Loan by following the steps:

Download any of the instant credit line apps, in this case, we are taking VIVA Money – Instant Personal Loan App, you can choose any of them.
Sign up with your mobile number using the One Time Passcode (OTP).
Choose your desired credit limit, and press apply.
The app will ask you to complete the KYC process.
Submit the documents (If required).
Submit your digital signature as it is a 100% online process.
Choose your preferred EMI tenure and press apply.

The approval process will take 15-30 minutes to complete. Once your application gets approved you can start withdrawing.

Who should opt for a Line of Credit and who should avoid it?

A Line of Credit presents an excellent opportunity for individuals to address their financial requirements while benefiting from reduced interest rates. But every good thing has its own advantages and disadvantages. If you manage all your credits in a stable way and you repay the borrowed amount in a wise manner then a line of credit can be a very good option for you. On the other hand, if you are not so disciplined regarding your financial matters, in case you are uncertain about your ability to repay the line of credit, it is best to avoid it. Just like a credit card, a line of credit can be a blessing if used wisely, but a nightmare if misused.

In conclusion, understanding the line of credit meaning is essential for anyone seeking financial flexibility and control. A line of credit offers a unique opportunity to access funds as needed, providing a safety net for unexpected expenses and a strategic tool for planned investments. By grasping the key components such as interest rates, repayment terms, and credit limits, individuals can make informed decisions that align with their financial goals.

Ultimately, a line of credit is not just a financial tool; it’s a dynamic resource that adapts to your evolving needs. You can confidently take charge of your financial journey and pave the way to a secure and prosperous future by staying informed and leveraging its benefits wisely.