What is a line of credit? How is it different from loans?
A line of credit is a credit limit/ facility given by the banks or some other financial institutions. It provide to the government, business, or an individual. if they do ask for more needed money, then this credit facility is being used. You can repay the loan amount immediately or over time.
It is different from loans. I tell you how? In loan you can ask for a particular amount towards lender against a defined interest rate for a defined time period. Here, you have to pay interest along with the actual amount repayment till you repay all the loan. If you cross the time deadline an extra interest you have to pay over it.
But, this is not the case in credit line. It defines as, you can draw the maximum amount and after it you cannot ask for more money. But, if you have a credit line facility then you can draw money as per your requirement. Borrowers are ready to give to rate of interest of asked amount. It don’t ask for collatral. You have to check for all possible pros and cons before applying.