What is the difference between a credit line and a loan

1. What is the difference between a credit line and a loan? A line of credit and a loan both are good credit supports that you can seek in a monetary crunch and meet your needs. You can choose any depending upon the nature and quantum of your requirement besides your repayment preferences. With a loan whether it’s an Instant Cash Loan or a Quick personal loan, you can access the lump sum amount and meet your one-time cash need. While a line of credit is the best when you have a long-term and continuous financial need. Let’s understand the features of and differences between a loan and a line of credit. Features and Benefits of a Loan: 1. Definition: A loan is a credit option where a one-time payment of your borrowed sum is done. Once it’s credited to your account the interest starts accruing and immediately you become liable for the repayment of the EMIs. The EMIs are a combined form of the principal borrowed and interest applied that remains the same throughout the period of the loan. 2. Instalment loan: The loans are always instalment loans where the borrowed sum is distributed amongst EMIs that you pay over the period.

2. An EMI consists of equated part of the principal borrowed and a portion of interest applied. 3. Lumpsum credit: In a loan, you always get the borrowed amount in your account in one shot. Interest is also applied on the full borrowed sum irrespective of its use. 4. Secured and Unsecured: You can always get an unsecured loan based on your credit history, CIBIL score and quantum needed. Otherwise and for a higher amount loan, you can go for a secured loan too by keeping collateral with the lender. 5. Tax benefits: Under various heads, the government extends some rebate on the loan and or the interest paid on the loan. You can check them to claim the deductions after paying the EMIs. Features and Benefits of a Credit Line: 1. Definition: A Line of Credit is a credit option where a credit limit is approved on your account out of which you can keep borrowing whenever needed. Interest will be calculated only when and on the sum borrowed rather than the total approved credit limit. You can pay back your dues of a credit line variably as used and billed. 2. Easy Access: A line of credit is always an online credit option that you can easily access anytime, anywhere. This helps the best in emergency cash needs. 3. Continuous Credit: A credit line is easy to renew and you can keep using it as long as you need. The credit limit can be revised with part or full repayment of the credit line. 4. Unsecured: A line of credit is always unsecured and you have to mortgage nothing to apply for it. You can get the approval based on your income, credit history, nature and source of income etc.

3. 5. Flexible use and repayment: You can pay back the dues of a credit line in variable parts and only when you use it. No lump sum amount is the base for interest calculation, you pay as you use. Differences Between a Credit Line and a Loan: 1. Nature: The loan is one-time credit support that is given with a condition to repay over time added with the interest. While a line of credit is revolving credit support that you can use, payback and use again based on your needs. 2. Suitability: A loan is good when you have a bigger financial need to be met in one go, like for the payment of tuition fees at the college. Whereas the credit line can be used for discrete and recurring needs and maintained as a backup for whenever is needed like daily conveyance or grocery shopping etc. 3. Interest rates: In a loan, the interest is calculated on the total sum borrowed often at a fixed rate for a fixed period. Albeit on a line of credit, the interest is charged only when you use the money out of the approved credit limit. In the case of the sitting ideal, no interest is accrued on a credit line. 4. Interest accrual: In a loan, the interest is calculated on the total credit approved irrespective of the use. But in a credit line, the interest is charged only when and on you borrow the sum out of the approved credit limit. 5. Repayment: Repayment of a loan is done in EMIs over a pre-decided period. In case of failure or default in repayment, penalties or additional charges are involved affecting adversely your credit score. Whereas in a credit line, you can pay back variable as possible for you only after using the money. No penalties or fees are added in case of gaps in repayment as long as you pay the minimum due thus posing no impact on our credit history. Applying for a credit line is comparatively easier than a loan since the line of credit is available online and you can access them anytime anywhere. Almost every bank and NBFCs are now present online that offers both a loan and a credit

4. line and you can decide upon one to borrow the money from. FlexSalary is also an NBFC-backed lender that gives a line of credit exclusively to salaried professionals. FlexSalary has relaxed eligibility criteria that are open for people with a monthly salary of Rs.8,000. It has a short and simple application process that comes with an instant approval facility that you can access 24*7 making it perfect for emergencies or urgent financial needs. Here, you can pay back your dues in flexible EMIs as no fixed EMI is mandatory in flexible tenure of 3-36 months. FlexSalary credit line can be an easy, quick and pocket-friendly credit option for every salaried employee for applying reasonable interest rates with no hidden costs. The Bottom Line: You can go for both; A loan and a line of credit based on your financial requirement, repayment capacity and urgency of the need. For bigger expenses, you can choose a loan since you can go for a secured loan as well in case needed. While, a line of credit suits perfect for continuous, comparatively smaller and discrete expenses.