While it is smart to make a budget and save for unexpected events, the realities are sometimes different and life doesn’t always make things go according to our plans. The only option left with any person at such situation is borrowing. Whenever we are in need of a monetary support for a personal need, we prefer to avail a personal loan which is easy to get as well as repay.
But have you ever wondered what will happen if you are not eligible for a personal loan?
Being rejected by a lender to offer you a loan will certainly worsen the situation. In such scenarios, there is only one way out which we call a Personal Line of Credit. Let’s get introduced with this modern way of borrowing which indeed better than a personal loan in terms of transactions as well as eligibility criteria.
What Is A Personal Line Of Credit?
A personal line of credit is a way of personal financing which resembles a credit card. It is a revolving credit where there will be an agreement between the lender and the borrower. The lender promises to lend a particular amount to the borrower which the borrower can avail in a number of installments. The borrower has to pay interest only on the amount which he has availed, not on the whole amount. There is no fixed amount which the borrower has to pay every month. The payment of each month depends on the amount which is availed by the borrower.
Similar to a credit card, a borrower will be able to borrow money as often as needed as long as he doesn’t exceed the maximum credit limit. Most of the lines of credits are collateral free loans. One can withdraw some amount from the line of credit and repay the same to maintain the balance. A line of credit is a much-used tool to face financial emergencies.
Here Are The Main Differences Between A Personal Loan And A Personal Line Of Credit
Loan Tenure
Unlike a personal loan, a line of credit has no fixed time frame by which you are to return the borrowed amount. A personal loan must be paid back within the prefixed time frame which is usually one to five years. However, if you opt for a line of credit, there is no fixed time to pay back the loan. The fund you borrow becomes available once again when you pay the borrowed amount.
Repayment
Just like tenure, there is no fixed term in repaying a line of credit. While availing a personal loan, you are to pay a fixed amount till a predefined time and at the end of the same, you will be debt free. Unlike this system, a line of credit payment depends on the previous balance, amount drawn, accruing interest and other factors.
Time of Disbursement
While availing a personal loan, the whole lent amount is disbursed in a lump sum. But if you are to avail a financing by a line of credit, you can have the amount in many small parts. A borrower can withdraw a part of the balance whenever there is a need.
Manage Financial Uncertainties with a Personal Line Of Credit
Fees
The fee which you pay for availing a personal loan and availing a line of credit are different. To avail a personal loan, you are paying a one-time processing fee whereas to avail fund from your line of credit, you are to pay a fee every time you withdraw money.
Cost
The cost of availing a personal loan is higher than a personal line of credit. It is because you are to pay interest only on the amount that you have accessed. But in a personal loan, you are to pay interest on the whole amount. Moreover, if you can pay off the whole borrowed amount in the following month, you will be saved from the burden of compound interest which makes it impact more when you take a longer duration to repay the loan.
How To Get A Personal Line Of Credit?
A personal line of credit works best when you are not assured of the exact amount and time when you are going to need a financial boosting. A personal line of credit can even be helpful if you want to keep an emergency fund.
In India, the concept of line of credit is still new and there are only a few lenders who are offering a personal line of credit. Here are the present top lending institutions where we can apply for a line of credit.
Flexi Loan from Bajaj Finsrev
Bajaj Finserv offers a line of credit for a personal use which they call as flexi loan. One can apply online for the same through the website of the lender. The maximum amount will be deposited in the loan account which can be withdrawn as often as needed. The eligibility criteria for availing a flexi loan are-
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- One has to be 25 to 55 years old
- Must be a salaried person
- The applicant should be an Indian, residing in any of the cities enlisted by the lender.
MoneyTap’s Personal Line Of Credit
Money Tap is an NBFC and this company provides a personal line of credit up to 5 lakhs. To apply for this facility, you are to download the mobile application of the company by which the loan can be applied. The credit limit is available for the lifetime and you will also get rewards on the first use of money tap credit card. The documents needed to apply for the same are- address proof, ID proof, PAN card number and your employer details.
CITI Bank Ready Credit
Citi bank also provides a line of credit to its customers, which they call ‘Citi Bank Ready Credit’. To avail of this facility, one has to open a ‘Citibank Suvidha Salary Account’. One can apply for a line of credit from Citi Bank through this account. The maximum amount which can be availed is 5 lakhs. The interest is calculated on a daily reducing basis which makes the loan cost down.
A line of credit is the modern way of borrowing. It works best when a borrower wants to have some extra fund with him which can us easily accessed in emergencies. Moreover, as most of the line of credit comes with a lifetime credit limit, you are saved from the hassles of applying for the loan again and again. The unsecured nature is adding more value to it hence it is believed that a line of credit will gain its popularity in times to come.
