What is a Line of Credit?
A line of credit is a ready source of funds (money) for both personal and business needs. It allows you to access funds up to the maximum limit and requires a minimum monthly payment for a specific tenure. A personal credit line works like a revolving account where you can withdraw money, make monthly payments based on your convenience and spend the money again in a virtually never-ending cycle. You just need to make sure that you make timely repayments and do not exceed the approved credit line amount.
The best part about a personal line of credit is its built-in flexibility that allows you to borrow and spend as and when you need funds, and pay interest only on the amount withdrawn from your revolving line of credit.
Types of Credit Lines
A line of credit can be classified into two broad categories based on the collateral backing – secured and unsecured.
- Secured Line of Credit: In a secured credit line, you get the loan against a collateral that you place as security. The lender can seize or liquidate your assets if you fail to repay on time.
- Unsecured Line of Credit: An unsecured credit line is a revolving credit account for funds withdrawal which does not require you to place any asset as collateral. For an unsecured line of credit, interest rates generally vary depending on the bank. They are floating interest rates.
Depending on the purpose for which the line of credit loan is used, it can be classified as a personal credit line or business credit line.
- Personal Line of Credit: Typically used for meeting the expenses of an urgent and immediate nature or long-drawn expenses, such as a sudden financial need or a family function or even a big purchase.
- Business Line of Credit: Used for funding your business expenses, often of an ongoing nature, such as working capital requirements, wage payments, purchase of raw materials and inventory, etc.
There are also certain credit lines that serve a very specific purpose, such as the following:
- Home Equity Line of Credit (HELOC): A secured credit line backed by the home owned by the borrower. It is usually available for a set time period, typically this “drawing period” is about 10 years, after which the borrower must make the full payment. HELOC is often used for home repayments, improvements, emergency fixes, etc.
How is MoneyTap's Personal Credit Line Different from a Personal Loan?
MoneyTap's line of credit can be used to borrow funds from in the form or a personal loan, which we call Personal Loan 2.0. It is quicker, better, flexible and loaded with benefits. It is where your financial worries end. Here’s why it makes more sense as compared to a standard personal loan:
- A personal loan offers a lump sum amount at one time and the interest is charged on the entire amount starting from day 1, irrespective of whether you use up that entire amount or not. In contrast, with MoneyTap you have access to money as and when you need it and the interest is charged only on the amount you actually utilize and not on the total credit line allocated.
- You can borrow an amount as low as ₹ 3,000 from your approved amount, unlike a personal loan where it’s just for a larger amount. The EMI tenures are also flexible in comparison.
- A loan is usually given for a specific purpose, for example, a home loan or car loan, etc. But MoneyTap Personal Loan 2.0's line of credit does not require a specific purpose for approval. You can use the funds for whatever purpose you wish, and whatever your financial need is – from medical emergencies to student fees, to vacations or a big purchase.
So, the next time you need quick and easy access to emergency funds with none of the hassles and delays of a standard personal loan, remember that MoneyTap Personal Loan 2.0 with a credit line is quick, flexible and affordable. With our credit line loan, you will never have to turn to anyone else when in need!
