Line of Credit
The term line of credit represents that specific amount that can be provided as loan to the borrowers by several financial institutions, banks and other private lenders. Before offering the actual loan amount, the lender and the borrower legally agree over all the terms and conditions that are related to the deal. This legal agreement contains information regarding the interest rate pattern and percentage that would be applied on the loan amount. It also contains the loan tenure, monthly installments and several other things.
The amount offered as line of credit is decided by the lender. There are a number of factors that are considered before deciding the amount. These are the credit report and credit score of the individual. The amount offered may be a few hundred or may be thousands or even millions. The extension of the credit limit depends on the loan provider's impression about the creditworthiness of the customer.
There may be a wide range of line of credit loans. These loans are offered for various purposes. For example, there is the home equity line of credit. This is a secured loan that is provided against equity value of the borrower’s home that serves as the collateral for the loan.
Again, there is the business credit that offers several loan products to meet the financial needs of the businesses sector. These loans help the businesses to expand their productivity as well as the operations. Necessary funds are offered for buying new machineries, new offices and also for renovation of the existing infrastructure.
On the other hand, there are several loan products that are developed as consumer credit products. These loans are further divided in mortgage loans, personal loans, auto loans and so on. Several purposes can be fulfilled through these loans. The terms and conditions and the interest rate patterns of all these loans are different. Apart from the loan products, there are a number of credit cards that are offered to the customers.