Consumer credit or line of credit, comparison of credit programs online
It is relatively easy to distinguish one banking instrument from another and even the most inexperienced lending user can handle this task.
A credit line is one of the types of bank credit that involves the under-utilization of the credit. The credit line is classified into 2 categories:
- Renewable – provides for the crediting of a loan in the event of a partial or partial cancellation of an earlier debt.
- Non-revolving credit line – The borrower withdraws the money received in the loan in installments as needed . Once the entire amount has been withdrawn and the debt has been repaid in full or in part, no new amount will be credited to the borrower’s account.
Consumer credit is a banking operation
Where funds are issued as a lump sum with repayment and guarantee terms. In other words, when you receive a consumer loan, you receive the entire amount of money at once and then repay it in installments according to the repayment schedule. The bank does not provide you with any additional funds in the normal cash loan repayment process.
To illustrate how a credit line differs from a consumer loan, we summarized all the differences and characteristics of the two bank products in a comparative table.
How credit line and consumer credit work
Both bank products, both consumer credit and credit line, can be used in the same situations, for example: you have to pay for services, bills, urgently need to buy goods for personal use, but you currently do not have the money . Simple life situations can be solved with both a credit line and a consumer credit. But in order to choose one of the two financing methods, you will need to try the terms of both products and understand which credit method is most convenient for you.
If a consumer loan is issued to the borrower in cash and in full, the credit line works the same way as a credit card: you always have an extra cash reserve that you can use all at once or in installments. In addition, you can withdraw money from a credit line whenever you need it, so this type of credit is considered to be more convenient due to its urgency. But many borrowers who use a credit line rather than a credit, over time, have the impression that they are the owners of the money available as a credit line.
This feeling is deceptive: the money on the credit line belongs to the bank and will have to be returned. Quite often, bank customers who do not fully understand the basic terms and conditions of a credit line simply increase the borrowing limit without trying to pay off their existing debt.
In some situations it will be rational to draw up a credit line
- In situations where you have the same expenses in a short period of time: treatment fees, education expenses, repairs, construction, etc.
- If you want to guarantee early full coverage of all expenses in the event of an emergency. In other words, if you are in urgent need of a large sum of money, you will be able to use the credit line immediately. But keep in mind that when you make a credit line, you make certain commitments, so this step should be carefully considered.
- In situations where the purpose of financing already exists but the exact amount of expenditure is not yet known.
In summary, however, the credit line differs with a much more flexible financing mechanism: the money can be used later and the credit limit can be increased. However, if in your situation you need a one-off cash assistance and you are fully satisfied with it, a regular consumer loan with a short repayment term will be the ideal option.