- Date : 02/03/2022
- Read: 3 mins
What is Credit Line and Why Is It a Blessing for Millennials?
Millennials are experiencing a novel kind of demand for credit; credit line, a new-age credit facility, delivers a unique mode of credit accessibility.
The Changing Financial Landscape
In a post-pandemic age, Millennials face the problem of having to balance precarious financial conditions with the need to live life to the fullest. As the constraints of lock-down gradually weaken, young individuals want to regain a sense of normal. In order to do so, Millennials and GenZs have returned to indulging in consumerism with a vengeance. Activities such as shopping, eating out, travelling, and ceremonial gatherings have been at an all-time high. With such a boom in expenditure comes a desperate need for credit accessibility.
Over the last few years, people have used all sorts of means, traditional and modern, to acquire credit. Individuals have opted for personal loans and credit cards at a robust rate.1 Moreover, with the worldwide advent of cryptocurrencies and other digital payment systems, people have found convenience in managing their daily monetary exchanges. Also making their way into Millennials' financial lives are Buy-Now-Pay-Later (BNPL) apps. Among these various options, a new and innovative method of acquiring credit accessibility is Credit Line.
What is Credit Line?
Credit line is an agreement that a borrower makes with a lender – usually a financial institution like a bank – where the former can draw funds from the latter up to a certain pre-set credit line limit. In addition, the borrower is responsible for paying back the lender interest, which is calculated on the amount borrowed rather than based on the credit limit. The eligibility of the borrower determines the credit line limit, and they are allowed to repay the amount borrowed in a series of flexible EMIs within an agreed interval of time.
Given the dynamics of such an arrangement, the borrower now has a way of accessing money whenever the demand for credit arises without worrying about paying back exponentially more than how much was borrowed. Whether it be for emergency use or just to limit one’s expenditure, credit line is ripe with financial advantages.
To avail a credit line, you simply have to go to a bank or log in to a fintech website and apply. After submitting the required documents, namely an application form, KYC documents like PAN card and proof of address, bank statement, and other financial documents, the bank will then gauge your eligibility. Whether you are eligible depends upon your credit score, the validity of your documents, your income, and your financial history. The rate of interest and your credit limit are determined by the particular bank, your creditworthiness, and the type of credit line you apply for. Interest rates range from 0% to 18% annually while credit limits can go up to ₹ 25 lakhs or more. Some popular financial institutions that offer credit line facilities include banks such as CitiBank and Union Bank of India and app-based platforms like LoanMeet and BajajFinserve.
In this current economic landscape, it is definitely not a surprise that this kind of credit accessibility agrees with the millennial generation. With the rise in the cost of living and the instability of income, there is constant anxiety regarding expenditure in the minds of the youth. Credit line offers a safeguard and a source of convenience in times of emergency and crisis.