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What is a Line-Based Personal Loan?

Published on May 31, 2022Updated on Nov 30, 2023

What is a Line-Based Personal Loan?

Many times, our requirements of funds are spread over time and we have to borrow the funds all at once and start paying the interest cost, whether the funds are utilized or not. Such a situation is not desirable for any borrower as it increases the cost of borrowing and unnecessarily increases the EMI amount. 


Therefore, in such a case, you may consider availing a line-based personal loan, which works similar to credit cards and offers much flexibility to users. 

Let’s understand the concept of a line-based personal loan, which is also known as a personal line of credit.

What is a Personal Line of Credit?

A personal line of credit works like a credit card, where the lender based on your eligibility approves a personal loan limit for a fixed tenure. You can avail of funds as and when required and pay interest charges only on the amount utilized from the approved loan limit, not on the entire loan amount.

Compared to an instant personal loan, the borrower needs to have a high credit score and stable income source to avail of a line-based personal loan. Also, the repayments depend on the amount withdrawn from the personal line of credit. There is no fixed repayment amount to repay the loan amount withdrawn. Furthermore, the borrower needs to ensure the loan amount is entirely repaid before completing the loan tenure. At the moment, this product is not available in SMFG India Credit. If you anticipate a future need but are not sure of the amount, please contact our customer care or apply for a loan against securities.

Must Read: A Complete Guide of Personal Loan Glossary & Terminology

How Does a Personal Line of Credit Work?

A personal line of credit is an unsecured form of loan, where the loan limit is decided by the lender based on the eligibility of the borrower.

Once the loan is approved, you can borrow an amount equal to or less than your credit limit at once or at intervals, subject to repayment of the utilized amount. Usually, there is no limit set on the number of withdrawals as long as the sum is within the authorized limit.

You can spend the amount for any purpose and there is no spending restriction. Once you have availed of the loan, the loan repayment starts as per the agreed terms from the next month. With each EMI paid, the limit is restored to the extent principal is repaid. If you need, you can borrow the amount once again, but you have to ensure the loan is repaid before the loan tenure ends.

Pros and Cons of Line-based Personal Loan


  • Flexibility: Can utilize money as needed
  • Cost-effective: Have to pay interest on the money borrowed, not on the approved loan limit
  • Accessibility: Quick access to funds
  • No Spending Restriction: Funds can be used for any purpose 


  • Impact on Credit Score: Higher loan utilization can lower credit score
  • Difficult to calculate EMI Amount: Multiple withdrawal amounts makes it difficult to calculate the EMI amount. The EMI amount changes after every withdrawal.
  • Risk of Overspending: With constant access to funds, it may increase the temptation to overspend 
  • Higher Interest Rates: The interest rates are usually higher, since they are charged monthly
  • Strict Eligibility Criteria: This product is not usually available for everyone. It is only offered to individuals with highly stable employment, excellent income levels, and credit scores.
  • Lower Repayment Tenures: The loans availed with this facility usually have a lower / less flexible repayment tenure as compared to traditional personal loans.
Must Read: How To Choose The Best Personal Loan For You?

How to Get a Line-based Personal Loan?

The process of getting a line-based personal loan is similar to applying for an instant personal loan. You need to meet all the eligibility criteria prescribed by the lender to be eligible for the loan. Based on your financial status, income status, and loan eligibility, your personal loan interest rate is determined by the lender. Please note that at this moment, this product is not offered by SMFG India Credit.

The personal loan documentation includes:

  1. All KYC Documents
  2. Last 6 months' bank statement
  3. Last 3 months' salary slip
  4. Form 16 or income tax returns

You can use the personal loan EMI calculator to calculate the repayments, which will help you plan your borrowing and systematically reduce your interest cost. To calculate interest cost accurately, you need to calculate interest daily, and not on a monthly basis. Moreover, this product is more suited to individuals who realize they may have a need for funds but are not sure when they would need the money, or how much. A lot of people who signed up for this product without actually needing it have ended up in deep debt, because like credit cards, this product gives one a false sense of security, and may encourage irresponsible financial behavior.

If you are looking for a personal loan at a highly competitive rate of interest, and you know exactly how much you need, you can apply for a traditional personal loan with SMFG India Credit. Depending on your eligibility, you may be able to get up to INR 25 lakhs* at attractive interest rates starting from 11.99% per annum and flexible repayment tenures between 12 and 60 months.

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*Terms and Conditions apply. Loans are disbursed at the discretion of SMFG India Credit.