In contrast to the installment loan, a maximum credit is set for a credit line, which can be used again several times. There are a wide variety of maximum loans for credit lines. Most providers define the framework between USD 5,000 and USD 25,000, but other, higher and lower amounts are also possible.
The interest rate on a credit line is usually variable, which means that the bank alone has the right to adjust the borrowing rate for the loan. Incidentally, no legal processing fee may be charged for the payments. However, this is still a requirement in older agreements and should not be accepted by the borrower.
Applying for the credit line
In order to apply for a credit line, the usual credit documents of the bank have to be presented. For employees, these consist of the last three salary slips, for self-employed persons from the balance sheets and annual financial statements, business evaluations and tax assessments. The bank will review these documents and then proceed with the application process.
Most credit institutions have a credit application for the application, which you can fill out at home. After receipt, it is checked and decided according to a scoring system. After the positive decision you will receive a written confirmation and the loan will be booked for you.
Retrieval and repayment
The loan can be called up conveniently by transfer to the counter account, usually a checking account with the bank. The monthly rate is then debited from this current account. The monthly rate differs depending on the agreement with the bank. There are even credit institutions that only require an interest payment and allow a fully variable repayment.
However, it is advisable to agree a repayment rate so that the loan agreement can be terminated again. A repayment of the loan is possible at any time without giving reasons. No return fee will be charged. This gives maximum flexibility.
Protection options for installment payments
Securing the installment payment also makes sense for a credit line. The installment credit banks often offer protection against unforeseen unemployment and incapacity to work. In the event of damage, these insurance companies then take over part of your installments and ensure that your loan is not canceled. However, these insurances naturally cause additional costs, this amount is then added to your rate or they have a smaller repayment.
A credit line is an interesting tool for customers who have fluctuations in their capital requirements that persist over a medium-term period. It is a loan with a lower interest rate compared to the overdraft facility but a higher interest rate than a loan secured by mortgage, for example. Of particular interest for the self-employed is the fact that the payment can be revolved at any time from the available funds.
There is also the option of being able to repay the loan at any time when new capital has arrived in the account. The interest burden on the loan is low and manageable. A highly recommended alternative, especially compared to the overdraft facilities of the various banks. In addition to the overdraft facility, the monthly debit also results in a repayment and ultimately also a complete repayment of the loan.