Credit Card, Personal Loan, or Credit Line… which option is best for arranging money in an emergency?

Like credit card and personal loan, you can use the money of credit line as per your need anywhere. However, like personal loan and credit card, the option of credit line is also beneficial in some cases and not in some cases.

The usefulness of personal loan and credit card is not hidden from anyone. In difficult times, you can easily arrange money through them. But apart from these, there is another option about which very few people know. That is Credit Line. In banking language it is called Line of Credit. Like credit card and personal loan, you can use its money as per your need anywhere. However, like personal loan and credit card, the option of credit line is also beneficial in some cases and not in some cases. By knowing the pros and cons here, you can understand for yourself which option is best for arranging money in an emergency.

What is a credit line?

Credit line is a fixed amount received as a loan from which you can spend the money according to your need. The bank charges interest on the amount you spend. The remaining amount remains in the credit line. No interest is charged on it.

Suppose you have received Rs 2 lakh as a credit line. But you need to spend only 50 thousand out of it. In such a situation, you will have to pay interest only on Rs 50 thousand. The remaining 1.5 lakh will remain in the line of credit. There will be no interest or penalty on them. If you withdraw 20 thousand more from it, then you will have to return Rs 70 thousand along with interest. No interest will be charged on the remaining 1 lakh 30 thousand.

This is how the amount is decided

The amount received under the credit line is also decided on the basis of your financial status and credit score. It can be from Rs 3000 to 10 lakhs. The credit line starting limit, its interest rate and other rules are determined by the bank or other financial institution issuing the loan.

Personal Loan Vs Credit Line

The interest rates of credit line are higher than personal loan, but still credit line is considered a better option than personal loan in many cases. There are many reasons for this –
In the credit line, you are saved from the prepayment charges of the loan, etc., which you have to pay in a personal loan.

In a personal loan, you have to pay interest on the entire amount you take as a loan. But in a credit line, neither interest is charged on the entire approved amount nor is there a compulsion to use it completely.
It is quite flexible as compared to a personal loan. In a personal loan, you have to pay a fixed EMI on time, but in a credit line, you only have to pay the interest. You can pay the principal amount later as well.

It is also important to know this

Keep in mind that if you do not pay the principal amount in it, then the interest payment will keep increasing. Apart from this, there is a possibility of unexpected changes in the credit line, that is, the bank approving the credit line can decide to reduce your limit or change your interest rate at any time. In such a situation, whether you should take a personal loan or a credit line, this decision should be taken by you keeping in view the need and available options.

Credit Card Vs Credit Line

Some people say that credit card and credit line seem to be the same, but there is a slight difference between them. In a credit line, you do not get any card, you only get a loan agreement line. You can withdraw money from this line as per your need. The amount you want to withdraw from that line, that much amount will be transferred to your account. You have to return the money spent along with interest. But in a credit card, a certain amount of money is made available to you online.

You have to pay interest only on the amount you spend from that amount. If the money spent during the grace period is returned, then there is no need to pay interest on it. Apart from this, the money that you return after spending gets added to your limit again and you can use it again. In such a situation, after understanding the advantages and disadvantages, you should decide for yourself which option you should choose in an emergency.