6 Tips to Manage Your Line of Credit Like A Pro

6 Tips to Manage Your Line of Credit Like A Pro

29 January 2024 | By INDIE

A line of credit loan (LOC loan) appears to be a diverse and easy financing solution. In contrast to typical loans, an LOC has a pre-approved credit limit that allows borrowers to draw cash as needed. This adaptability makes it an appealing option for dealing with unexpected expenses or capitalising on enticing opportunities without the constraints of a lump-sum loan.

Knowing your credit limit

Before you open a line of credit, ensure to have a complete grasp of the LOC loan. Being aware of the credit limit in an LOC or line of credit, especially the maximum withdrawal limit, is important for sound financial management. The maximum amount is the highest amount you can borrow, and staying within this figure is necessary to avoid financial overextension. Note that if you exceed your credit limit, then it may result in additional costs or a drop in your credit score. As an outcome, borrowing must always be planned in alignment with your repayment potential and goals. Doing so ensures proper utilisation of available credit limit while avoiding financial hardships.

Prudent withdrawals

Withdrawing required funds from LOC loans must be performed with prudence. It is necessary to prevent rash borrowing and just withdraw the funds when required. To avoid the accumulation of unnecessary debt, ensure each withdrawal of yours is made with a specific purpose and a repayment plan. This strategy not only helps you in better management of financial responsibilities but even helps you in maintaining a good credit record.

Keeping a watch on interest rates and fees

LOC loans frequently feature variable interest rates, which indicate that the rate may alter based on market conditions. This variation has a direct impact on borrowing costs over time. It is important to note that interest is only levied on the amount withdrawn, not on the whole credit limit. As a result, it is vital to monitor these rates and any associated expenses, such as transaction or annual fees. This insight allows for improved financial planning and the avoidance of unforeseen charges.

Keeping track of your credit use

You must monitor your LOC frequently. Keep track of your credit utilisation, including how much you have borrowed and how much is still available. This approach permits you to make well-informed judgements regarding future borrowings while still staying within your budget. Regularly analysing your LOC statements can help you get a clear picture of your financial situation and change your borrowing behaviours.

Repaying timely

Repaying your LOC loan on time and consistently is critical to your financial wellness. Regular repayments help to enhance your credit score and lower your overall interest burden. Paying more than the minimum due amount is suggested whenever feasible since it helps lower the main balance and, as a result, the total interest payable. This meticulous approach not only manages your debt but also improves your credit score.

Preparing for financial contingencies

An LOC loan might be an excellent source of emergency funds. However, it is always a good idea to plan ahead of time how you will handle borrowed funds in the event of unanticipated events. Setting aside a fraction of your credit limit for emergencies or having a clear payback plan for any emergency borrowings might be examples of this. This type of preparation guarantees that you are ready for unforeseen financial requirements while maintaining your overall financial security.

Ending note

Managing an line of credit effectively requires a combination of discipline, planning, and awareness. Managing your funds becomes more flexible and smoother with INDIE's ‘My Credit Line’. The ability to withdraw any amount at any moment directly into your INDIE account, along with the ease of just paying interest constituent on the amount withdrawn, endows the benefit of financial management. Furthermore, INDIE's flexible repayment LOC plans are designed for your unique financial circumstances, making it as stress-free as possible.

Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.