Line of credit is a credit instrument being sourced to individuals, businesses, enterprises or government by financial institutions, including banks and NBFCs. Credit line is a loan credit offered to the borrowers in which they can utilize even small amount from the total sanctioned line as per their requirements. It is not compulsory to take loan amount in full, as in the case of other types of loan. Enterprises or consumers just need to pay the interest rate only on the borrowed amount.
Its majorly instant fund offered to borrowers at their disposal. Enterprises and consumers just need to pay an unused line fee or annualized percentage fee on the outstanding credit which is not used or withdrawn. Creditworthiness of consumers is primarily considered by financial institutions, banks and NBFCs before offering credit lines to them. Credit line of a customer is the maximum amount of funding he/she is allowed to take offered by banks and to be repaid in defined time frame.