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Line of Credit: How to Apply, Flexibility & Repayment

A Personal Loan Line of Credit works like a credit card, granting you access to a limited amount that you can use as and when you want.

Interest is charged only on the amount actually accessed. You can pay only the interest component as EMI for the tenure of the credit facility, repaying the principal amount at the end of the term.

What Is a Line of Credit (LOC)?

A Line of Credit gives you access to money “on demand” and can help you with expenses. Line of Credit (LOC) is an arrangement between a financial institution (usually a bank) and a client that establishes the maximum loan amount the customer can borrow. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit.

“Why would I want to Apply for a Line of Credit?”

Business entities and individuals can apply for this credit facility for regular access to funds. Based on the applicant’s creditworthiness and their financial status, the approval process may be fast.

Financial institutions like Banks, NBFCs, Small Finance Banks etc offer Unsecured Line of Credit facility to customers. This provides an assurance of cash flow for expenses, within a certain limit. The borrower can withdraw funds from this credit line as needed, and interest will be charged only for the amount withdrawn, not for the entire credit limit.

Basics of Lines of Credit

A line of credit is similar to a credit card in many ways. It provides you a credit facility that you can use as you wish:

  • The credit line amount is fixed and you cannot exceed the limit when you withdraw funds
  • Interest is charged only on the amount accessed
  • Lines of Credits are time limited, say for a duration of one year, at the end of which you have to renew the facility
  • When you make repayments on the Line of Credit, this repaid amount becomes available for you to borrow again
  • This rotational credit facility can be useful for meeting repeated or regular expenses, the money withdrawn and paid back at your convenience within the credit line tenure
  • You may be charged an Annual Maintenance Fee for using this credit facility.

Applying for a Personal Line of Credit

Generally, you can apply online for this facility just as you would for a Personal Loan. The line of credit application process would be quick and the documents required would be similar to Personal Loan document requirements.

If you apply for a Line of Credit at Bajaj Finserv, it can make the entire process easy for you. They have a speedy approval process that enables them to review your eligibility and your documents and credit records quickly. Based on your credit history, if you have a good credit score you could get easy approval personal line of credit and start accessing the funds immediately.

A Line of Credit can provide funds for various expenses which you can then repay and borrow again. If you want an unsecured rotational credit facility, a Line of Credit can be the ideal solution, with flexibility in repayments.

If you can ensure that this access to extra cash does not tempt you to spend beyond your limit, this is a good facility to make use of.

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