Line of Credit

A line of credit is a type of loan that allows a borrower to access a certain amount of funds from a lender, up to a pre-approved limit. The borrower can borrow and repay funds as needed and interest is typically only charged on the actually utilised. For instance, say you get a line of credit of ₹1 lac. You may borrow ₹40,000 at first and pay interest only on ₹40,000. Say you repay ₹30,000. Now you only need to pay interest on ₹10,000 and can borrow up to ₹90,000. Lines of credit offer flexibility and are commonly used by businesses in India for working capital purposes.