Credit lines, also referred to as a line of credit, are a type of credit product where you have a pre-approved amount of money. You can use any amount from the pre-approved amount and will have to pay interest only on the part you use. You can also borrow direct cash from a line of credit.
Let’s read on to know more about it and how it differs from a credit card and a personal loan. We will also read about the eligibility criteria and documents required to apply for a credit line.
Here are some features that make a line of credit unique -
Can borrow within the pre-approved limit
Don’t have to pay interest till you use the amount
Options to borrow cash
Fast processing because of being pre-approved
No limitations on usage of funds
Want to know how to get a line of credit? Well, you can apply for one both online and offline. Just follow these steps -
You have to meet the basic eligibility criteria and documentation requirement to qualify for a credit line. Here are some general eligibility criteria, which may vary based on the lender you choose -
Age should be within 21 and 65
Should be an Indian resident
Should have a CIBIL score of 650 or more
Should have a stable source of income (salaried or self-employed)
You will have to submit your proof of identity, income, and address as documents. Which documents are accepted will again depend on your lender.
Let’s learn about the types of credit lines available in the market -
As the name suggests, this is for individuals and can be used for any personal or family related spends.
This is extended to businesses and can be used for working capital, expanding, buying raw materials, machinery, etc.
Linked to a savings or current account, you are allowed to overdraw up to a certain limit. Overdrawing refers to withdrawing more amount than is present in your account.
This is utilized for bigger spends like home renovations or debt consolidation.
Since these products are very similar, let’s understand their differences by a table -
Criteria | Credit Line | Credit Card | Personal Loan |
---|---|---|---|
Access to funds |
Immediate, as it is pre-approved Funds also get available once you pay the amount you spent |
Immediate |
Depends on approval |
Purpose |
No limitations on end usage |
Can be used for online and offline purchases |
No limitations on end usage |
Interest charged |
Only on amount used |
Based on spending |
Pre-decided |
Repayment |
Can be paid in instalments or as a lumpsum |
Paid in monthly bills, option of paying minimum due amount |
Equated Monthly Instalments |
Additional features |
None |
Rewards and benefits |
None |
Experience Rewards with Every Swipe
A line of credit is a good credit product as you have easy access to funds and yet don’t have to pay any interest as long as you don’t use the money. You can get a line of credit from any bank or leading NBFC.
No, even though they are both credit products, they are not the same.
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