Let’s be honest. Most or rather all of us have faced a situation where we needed money urgently. It may have been for a major purchase where we ran short of cash, bills that needed to be paid before our salary got credited, or even a medical emergency that came out of the blue. When something like this happens, our first instinct is to ask friends or family for a short-term loans or ask our boss for a salary advance.
But what do we do if no one can or will spare the funds we need? It’s uncomfortable enough to ask people for money, but even worse when they turn us down or we have to ask more than once!
Traditionally, the only other option available was to approach a bank for personal loans. These days, people also use credit cards to withdraw cash for short-term needs, but the high-interest rates make this quite expensive. What if there was a third option with the benefits of both?
Well, there are apps for loans in India, such as MoneyTap. This app provides an instant loanor ‘Personal Loan 2.0’ based on just a few details filled in through a smartphone. All you need to do is download the app, and you could be approved for a line of credit in no time at all.
How a Line of Credit Works
First off, let’s look at the concept of LOC or Line of Credit. According to the Farlex Financial Dictionary, it is:
A credit arrangement in which a financial institution agrees to lend money to a customer up to a specified limit. A line of credit, generally arranged before the funds are actually required, provides flexibility for the customer in that it ensures the ability to meet short-term cash needs as they arise. Also called bank line, credit line, revolver, revolving credit agreement.
Basically, it’s a lot like a credit card. You are given a credit limit, and you can choose when and how much to use at any time. Interest is only charged on whatever amount you use, not like personal loans where you pay interest on the full sum from day one, whether you use it or not. But, you don’t need to pay higher interest on cash withdrawals or make minimum monthly payments since you can choose the repayment term.
