The pandemic situation and the subsequent lockdown have badly hit the financial wellness and livelihood of many people around the globe. Job losses and pay-cuts have made it difficult for a lot of working-class individuals and professionals. Hence, it is important for individuals to examine their financing options such as an instant personal loan or line of credit to plan their finances accordingly. Let’s have a look at the difference between the two financial tools to understand what will fit best for you in the long run.
Personal Loan vs. Line of Credit
Personal Loans are one of the best products for all kinds of financial assistance. They are often unsecured in nature i.e. you do not have to provide any collateral as security against the loan. Also, there are no restrictions on the utilization of loan funds which makes it an ideal choice when it comes to financing emergency situations.
On the other hand, personal Lines of credit behave like credit card accounts. You can apply for a loan and pay down your balance and access your available credit line again and again. Like an instant personal loan, you may be able to qualify for an unsecured personal line of credit with just your signature. However, if you secure your line of credit with an asset, you may receive a better interest rate on the loan amount.
Personal Loan Eligibility Criteria
To avail a loan you need to first check the personal loan eligibility criteria. They are as follows:-
- The applicant must have Indian citizenship to be eligible for an instant personal loan
- The applicant needs to be between the ages of 23 and 55 years
- Should be currently working with a private or public company or a multinational company (MNC)
- Monthly income should be based on their location, a minimum net monthly salary must be between INR 25,000 and INR 35,000
- Good to exceptional credit rating
Personal Line Of Credit Eligibility Criteria
- Good credit/CIBIL score
- The creditworthiness of the borrower
- Decent tenure of business existence
- Valid and authentic business documents and certificates
- Stable credit and financial history
- Business existence with profitability
It’s always a good idea to check your credit on your own before you apply for any type of loan or financial product. You don’t want to find out about any surprises or mistakes on your credit report when a lender processes your application.
- Personal Loan: For a personal loan, the lender will review your credit report and score, along with your income and assets, to determine whether extending credit to you is a good risk. The better your credit score and credit history is the higher are your chances of loan approval.
- Personal Line Of Credit: Interested applicants can apply for a personal line of credit online by visiting the official website of the bank or NBFC. Once the application form is filled and submitted. The bank’s representatives shall get in touch with the applicant. The bank will verify the submitted financial documents and once verified, shall issue the credit line to the customer.
Rate Of Interest
When you take out an instant personal loan, you are typically charged interest on the money you borrowed. You will be charged a fixed interest rate on the personal loan amount. This means your interest rate stays the same throughout the life of your loan. Interest rates on personal loans largely depend on your credit and your lender.
While a personal line of credit may offer you more flexibility, this typically comes at a higher interest rate on the loan funds. Yet unlike personal loans, that interest rate doesn’t kick in as soon as the loan is approved. It is best to start paying interest on a line of credit once you get access to any portion of the funds available to you.
Personal loans generally feature a fixed payment amount as well. This means that the size of your monthly payment won’t change while you’re repaying your loan. Fixed payments can make budgeting simpler. It’s easy to plan your monthly expenses when you know the exact amount you’re expected to pay on your personal loan.
In a line of credit, your monthly payments may vary widely from month to month and year to year. This happens because your monthly payment will be based on how much you owe along with the rate of interest charged on your account.
If you can figure out which financial product fits your situation best, there’s a chance you could save money and simplify your life. Do your research before you decide to apply for a loan and which lender to apply with. If you take your time and don’t rush into a decision, you can be confident that you’re choosing the best deal for your situation. An instant personal loan or a line of credit will help you tide over a financial emergency with ease. You can apply for instant personal loan using the personal loan app by Finserv MARKETS.