What is a credit line provision? When looking for a financial product such as a credit, you need to know everything about it, such as its requirements, conditions, interest, fees and what is a credit line provision .
The Credit Line allows access to a certain amount and use it at any time, the amount of which must be returned within the agreed terms between the client and the bank. For example, if the customer receives a check to collect and has funds, the bank will take the money from the credit line .
A credit line generates the payment of interest on the amount that has been used, in addition to implying the payment of commissions for using it and for associated insurance such as relief insurance, the latter may not occur in some countries.
The credit line is used by people, who take out a credit line to access flexible financing and use the money for certain expenses. Not to be confused with the traditional loan .
The disposition of a line of credit , allows to have an extension of money that the bank offers to its client, within a certain term existing a maximum limit to return it. It can resemble a checking account with money that the bank provides to the client, the difference is that in this case the money is not from the client, it belongs to the bank .
So that the client can use said credit account under the established conditions and limits and, after the end of the agreed period, the owner of the line must return the initial balance at the same time the bank will be charging operating fees for the line Credit and interest .
While traditional loans, the client requests an amount of money and must periodically pay the expenses and interest of the credit and the amount borrowed, once the repayment term is over, the loan ends, and in the case of credit lines They can extend it if the client needs it and the bank approves it.
The main advantage of this type of financing is its flexibility with respect to being able to use the available money, which they can access immediately each time, since the money is available in the client’s credit account. The bank makes available a balance, although the client can only use part of the money according to the needs.
The main disadvantage of the previous point is that the bank will charge them for having said amount on the credit line, in addition to the available money. They will charge you for the amount they use, and for the amount they do not use even if it is available but never move that money.
For what they are considering obtaining the credit line provision, they must first know what it is and what are the pros and cons of said financial product and whether or not it is appropriate to request it from the bank.