While individuals need funds to cater to various financial emergencies like catering to medical situations, wedding in the family or even sponsoring higher education for self or kids. The funds might also be required for things like buying a car. Similarly, businesses need funds to meet their day to day business requirements or to invest in the business for the future growth of the business. The best way to access these funds is to obtain credit in the form of a loan from the lenders which include Banks and NBFCs. While Banks provide loans in form of term loans, line of credit, credit cards and so on NBFCs have limited means of providing funds and since they are not allowed to issue a debit or a credit card like Banks, a line of credit is a well-known model of lending from the NBFCs
A line of credit works like a Credit Card where one has a sanctioned amount of funds they may withdraw from and pay as and when they want to. Meanwhile, they are charged interest only on the amount utilised thus resulting in huge savings in comparison to standard term loans if the need for funds is recurring.
A Revolving Line of Credit is a line of credit where the lender renews the line of credit upon its maturity based upon the credit profile and performance for the customer, the amount of subsequent line of credit could be different from the original amount depending upon the profile and performance.
While Banks offer line of credit and revolving line of credits, their reach has been limited as Banks have tough criteria and do not necessarily cater to all the sections for the society, which is where NBFCs or the Non Banking Financial Companies play a huge role by catering to a wider section of the society, NBFCs have dedicated funds for small businesses and often also provide revolving line of credits to businesses and individuals who are first time buyers or have less than ideal credit profile. While they may offer these loans at a slightly higher rate of interest than the Banks. It is the availability of funds and the ease of access that makes getting the revolving line of credit from NBFCs the desired option for individuals and businesses across the country.
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Revolving Line of Credit vs. Credit Card
A revolving line of credit works on a similar model as that of a credit card. However, there are fundamental differences, the first being that unlike a credit card a revolving line of credit is use case-specific and a business or an individual may use the credit line for specific purposes only. Other major difference being the rate of interest, while a Credit Card charges a very high amount of interest on the amount utilised and left unpaid, the interest rate is nominal and equivalent to that of other loans like term loans. A Revolving Line of Credit may be both secured or unsecured while a credit card is almost always unsecured.
Line of Credit vs. Revolving Line of Credit
Line of Credit has a specific period during which the borrower may use up to the specified amount and repay as and when they want, the interest is charged only on the amount utilised. The line of Credit automatically comes to close when the term ends. Whereas, in the Revolving Line of Credit, the tenure gets refreshed at the end of the original tenure and based upon the performance of the loan and current credit profile the limit amount and interest rate may change.
Choosing the Best NBFC
India has hundreds of NBFCs that offer revolving line of credits to individuals and businesses based upon their nature of work and the profile. Every NBFC caters to a specific section of society. Thus, it becomes virtually impossible for a business or an individual to search for the right NBFC for their revolving line of credit manually. The best way for any business or individual to find the right loan from an NBFC is to use the advanced platform of LoansJagat. LoansJagat enables individuals and businesses to enter their needs and find the best offers from the top NBCFs to match their business needs by choosing the terms like interest rate, amount, terms and several other conditions.