Great Options For Smarter Business Credit Now

In contracts with the bank, in oral conversations of bank representatives with borrowers, in the advertising of financial services, the word “credit line” is often found. But what is this line, what is it different from usual credit, what are the risks and benefits of its use, know not all.

What is a credit line and what is it for?

Stretch your money…

Let’s start from the stove. What is the main difference between a loan and a credit line? A loan is a strictly defined amount, often also intended for strictly defined purposes (auto loan, mortgage, etc.), which is issued to the borrower entirely, but only once. That is, having issued a loan of 300 000 rubles for a period of 5 years and at the same time having received cash at the checkout, the client continues to give money for a long 60 months according to the payment schedule. For the business line of credit this is a very important matter.

In the case of a credit line, a number of important parameters are added to the scheme for receiving and returning cash, the main of which is a flexible time schedule for using the loan and the ability to operate with different amounts within the established credit limit.

What is an overdraft and how do I use it

For example, if you want to pay a four-year course at a university, with an annual cost of 60,000 rubles, the bank can provide you with a credit line of 240,000 rubles. The peculiarity is that this money you use not immediately, but in parts: 30 thousand – the first semester, the second semester – 30,000 more, and so on. While the established credit limit (240 000) is not exhausted. But by that time the training in the university will end.

The terms of repayment of the credit line are determined by the bank in the contract, but the general rule is that each month it is necessary to return a certain percentage of the actual debt amount (usually not less than 10%) to the loan account. And by the time the credit line expires, the debt must be repaid in full. Additional bonus: in the process of using the credit line, interest is only on the amount of actually used credit.


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