The moment you experience a shortage of funds, you know you need to borrow. The financial market has grown and become more diversified. There are various types of debt available in the market that caters to your needs. However, every debt type has its advantages and disadvantages. The two most common types of debt, personal loans, and line of credit are very popular. It is very difficult to choose the better one, as both can meet your requirements without any limitations. Easy to get, and affordable these two forms of debt are always a favorite. If you are confused about why the line of credit will be more beneficial to you, try reading this out. It will give you a complete insight into why the line of credit can be better than an instant personal loan.
- The line of credit has a low interest. If you compare personal loans and line of credit, you save in line of credit. Why? The rate of interest is always low when it is about the line of credit. It is much low than the rates you get in a personal loan. You end up paying much less EMI as compared to a personal loan. It can help you with good savings. For credit at a low rate of interest, you must go for a line of credit.
- In the line of credit, interest is payable only for the amount you spend. Yes, you heard it very tight. Whatever amount you withdraw and use, you pay interest only on that. It can happen that you don’t use the entire amount sanctioned. So, you will pay interest in the amount that is used and not the amount that is sanctioned. However, for a personal loan, the interest is charged on the entire amount that has been approved. Whether you use the whole fund or not, you end up paying interest for the entire amount of credit.
- In the line of credit, an amount of money is sanctioned in your name. If you wish, you can withdraw a certain amount and use it. It is not a one-time disbursement that takes place in the case of a personal loan. In a personal loan, your account is credited with the amount once. Here the sanctioned amount can be withdrawn as and when needed by you. This way you can save yourself from credit and wastage of funds in unnecessary expenses.
Wrapping up
A line of credit has its benefits. However, a personal loan calculator can help you with various calculations and managing your finances well.
