It is an amount of money that the bank or the financial institution puts at our disposal for a certain time. During the period in which you have that extra amount, you can use the one you need when you need it.
How does it work?
Its operation is like that of a current checking account, for which we can have an extra balance. Bank and client will set the balance limit which will be available.
In this way, we will receive the agreed amount of money and we can use it when we need it and pay interest for only for what we have used.
Although you also have to pay a small interest to have the account open and have that extra balance, but that depends on conditions and entity.
When the agreed period is over, the balance at the beginning should be restored.
Where to request a line of credit?
You can request it and get a balance of up to USD 5,000 for a maximum of 36 months, to use it whenever you want and whatever you want. In addition, it has no opening or maintenance fees.
Advantages of a line of credit
- Get immediate liquidity to use when you need it
- You pay interest only for what you have spent
- Convenience of balance management, use it whenever you want and for whatever you want
How is a credit line different from a loan?
Although a loan and a line of credit are two ways to obtain financing for expenses or projects, they are not the same and have some differences:
- In a loan, the bank provides you with a total amount in which you have to pay back in monthly installments, where the amount borrowed plus interest and commissions is returned, instead on the credit line you have a total balance that you use when you need until the agreed period ends, when you will have to replenish the amount of balance that was initially.
- When the term of the credit line ends, you have the option of being able to renew, but in a personal loan it is not possible, it ends once the debt is settled within the agreed term.
- Regarding the payment of interest: on the credit line you pay a small interest for having that total balance, and a smaller interest for the amount you use. But interest on the total amount is paid on the personal loan.