How does digital credit line work?
First, a borrower applies for a credit line, and after approval, the lender sets a credit limit based on factors like income, credit history, and repayment capacity. Once the credit line is active, the borrower can draw funds whenever required, up to the pre-approved limit. “The key feature is that interest is only charged on the amount drawn, not the entire credit limit. For instance, if a borrower has a Rs 1 lakh credit limit but only withdraws Rs 20,000, interest is charged on Rs 20,000, not the entire Rs 1 lakh. Repayments can be made either through installments or in full, and as the borrowed amount is paid back, it replenishes the available credit, allowing for future use,” George Donchenko, Country Manager of Viva Money, said.
Benefits of digital credit lines
Flexibility: Borrowers can access funds whenever they need them without reapplying for a loan.
Interest on what you use: Since interest is only charged on the amount withdrawn, it can be a more cost-effective option for managing short-term expenses.
Convenience: With the entire process managed digitally, from application to fund withdrawal, users can access funds quickly and easily through an app or online platform.
Revolving nature: As borrowers repay the used credit, the available limit resets, providing continuous access to funds.”Digital credit lines are particularly useful for businesses managing fluctuating cash flows or for individuals facing unexpected expenses. They offer a convenient, flexible alternative to traditional loans, making them an increasingly popular choice in today’s financial landscape,” said George Donchenko of Viva Money, which achieved the milestone of over 15,000 customers in just a few months.
