You may come across a time in your life where immediate financial relief can help you straighten out a personal situation. When that time comes, you can either apply for a personal loan or a personal line of credit. Read on to know more about these.
Understanding personal finance and a personal line of credit
A loan for personal causes is unsecured, meaning you don’t need to pledge anything collateral to access the funds. All you need is a good CIBIL score and a lending institution that extends a competitive personal loan interest rate.
The purpose of applying for personal loan is open-ended. You can use it to pay medical bills, fund a wedding, pay for higher education, cover your travel expenses, finance home renovation, etc. A lender approves a lump sum amount and disburses funds into your loan account. Moreover, personal finance usually comes at a lower rate of interest.
In contrast, a personal line of credit works like a credit card account. You can borrow as much as you need, pay interest on only the amount borrowed and keep accessing your credit line as and when required.
Much like personal finance, you might qualify for an unsecured personal line of credit, meaning you won’t need to pledge any collateral. You can use the approved funds to pay for planned or unplanned expenses, just like personal finance. Since you can draw only the funds you need with a personal line of credit; this flexibility is awarded at a slightly higher rate of interest.
Additional Read: Pros and Cons of Unsecured Personal Loan
Personal loan vs line of credit
If you already have a set expense in mind and know approximately or accurately the amount you need, go for personal finance. These loans offer higher affordability and come with a more structured repayment plan. Besides, you will have no restrictions on the end-use and zero collateral requirements.
A personal line of credit is usually sought-after by self-employed professionals or individuals with recurring expenses, where they need to borrow funds recurrently. Perhaps, they need the extra cash to reinvest in their venture and make it bigger, or they may need to bridge a gap in their income during a slump. This type of finance is of significant help when you need to stay liquid for any end-purpose every month or every alternative month.
Additional Read: How to Choose the Best Personal Loan for Needs?
The bottom line
Now that you know the difference between loan and line of credit, it’s time to choose the option best suited to you. If you are opting for personal finance and looking for a trustworthy lending institution to apply to, turn to Tata Capital! Access loan amounts as high as Rs. 25 lakhs and get extended tenures up to 6 years.
We offer tailored personal finance at competitive interest rates, flexible repayment terms, and minimal documentation. Enjoy relaxed personal loan eligibility criteria and a simple online application process with us.
Learn more about our personal finance offering by visiting our website or giving us a call today!