{"id":59,"date":"2018-09-17T06:20:43","date_gmt":"2018-09-17T06:20:43","guid":{"rendered":"https:\/\/blog3.indifi.com\/?p=59"},"modified":"2022-11-15T12:37:48","modified_gmt":"2022-11-15T12:37:48","slug":"business-loan-vs-line-of-credit","status":"publish","type":"post","link":"https:\/\/www.indifi.com\/blog\/business-loan-vs-line-of-credit\/","title":{"rendered":"Business Loan vs. The Line Of Credit? Know Major Difference"},"content":{"rendered":"\n<div class=\"wp-block-image size-medium wp-image-599\"><figure class=\"alignleft\"><img loading=\"lazy\" decoding=\"async\" width=\"450\" height=\"300\" src=\"https:\/\/blog3.indifi.com\/wp-content\/uploads\/2018\/09\/Business-Loan-vs.-The-line-of-Credit-450x300.jpeg\" alt=\"Business Loan vs. The line of Credit\" class=\"wp-image-599\" srcset=\"https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2018\/09\/Business-Loan-vs.-The-line-of-Credit-450x300.jpeg 450w, https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2018\/09\/Business-Loan-vs.-The-line-of-Credit-768x512.jpeg 768w, https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2018\/09\/Business-Loan-vs.-The-line-of-Credit.jpeg 800w\" sizes=\"auto, (max-width: 450px) 100vw, 450px\" \/><figcaption><em>Business Loan vs. The line of Credit<\/em><\/figcaption><\/figure><\/div>\n\n\n\n<p class=\"wp-block-paragraph\">No matter if you want to start a business or build and grow an existing one, you\u2019ll surely need a considerable amount of money. Most of the would-be and current business owners rely on financing options to secure these funds. Two of the most common options for such borrowers are the <a href=\"https:\/\/www.indifi.com\/business-loan\" target=\"_blank\" rel=\"noreferrer noopener\">business loan<\/a> and the line of credit.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To select between the two, one should clearly understand what these financing options are and how they are different. If you are looking for financing options for your business and finding it difficult to select between a business loan and a line of credit, the information mentioned below will help.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Also Read: <a rel=\"noreferrer noopener\" href=\"https:\/\/www.indifi.com\/blog\/lines-of-credit-online-lenders-vs-traditional-banks\/\" target=\"_blank\">Lines of credit: online lenders vs. traditional banks<\/a><\/p>\n\n\n\n<div class=\"wp-block-button aligncenter\"><a class=\"wp-block-button__link has-vivid-green-cyan-background-color has-background\" href=\"https:\/\/www.indifi.com\">Get Business Loans Today<\/a><\/div>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.indifi.com\/blog\/business-loan-vs-line-of-credit\/#What_Is_A_Business_Loan\" >What Is A Business Loan?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.indifi.com\/blog\/business-loan-vs-line-of-credit\/#What_Is_A_Line_Of_Credit\" >What Is A Line Of Credit?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.indifi.com\/blog\/business-loan-vs-line-of-credit\/#Differences_Between_A_Term_Loan_And_Line_Of_Credit\" >Differences Between A Term Loan And Line Of Credit<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.indifi.com\/blog\/business-loan-vs-line-of-credit\/#1_Payment_Schedule_And_Amount\" >1. Payment Schedule And Amount<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.indifi.com\/blog\/business-loan-vs-line-of-credit\/#2_Borrowing_Fee\" >2. Borrowing Fee<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.indifi.com\/blog\/business-loan-vs-line-of-credit\/#3_Interest_Rate\" >3. Interest Rate<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.indifi.com\/blog\/business-loan-vs-line-of-credit\/#Selecting_Between_The_Two\" >Selecting Between The Two<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Is_A_Business_Loan\"><\/span>What Is A Business Loan?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A business loan or term loan is similar to other types of loans, like a home loan, car loan or personal loan. In simple words, it allows you to borrow a lump sum amount which you are required to repay over a fixed duration through monthly or quarterly installments. These loans generally have a fixed interest rate.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Is_A_Line_Of_Credit\"><\/span>What Is A Line Of Credit?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A <a href=\"https:\/\/www.indifi.com\/unsecured-line-of-credit-loans-india\" target=\"_blank\" rel=\"noopener noreferrer\">line of credit<\/a> is somewhat similar to a credit card. Based on your eligibility, a lender would fix a maximum borrowing limit for you. It is then up to the borrower to draw any amount of money from this limit.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For instance, if the maximum borrowing limit fixed by the lender is Rs. 10 lakhs, the borrower might withdraw only Rs. 5 lakhs. You can withdraw the remaining Rs. 5 lakhs at a later stage or repay the already withdrawn Rs. 5 lakhs to again raise the borrowing limit to Rs. 10 lakhs. The line of credit generally has a variable interest rate which is periodically adjusted.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Differences_Between_A_Term_Loan_And_Line_Of_Credit\"><\/span>Differences Between A Term Loan And Line Of Credit<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_Payment_Schedule_And_Amount\"><\/span>1. Payment Schedule And Amount<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The most important difference between the two is the payment schedule or amount. With term loans, there is a fixed installment that needs to be paid at regular intervals. This amount is made up of the principal as well as interest. Moreover, such loans have a fixed tenure.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">On the other hand, payments with a line of credit vary on a monthly basis depending on the amount borrowed by the borrower and the change in interest rate. Just like credit cards, they are revolving in nature and do not require you to repay the amount in full in any fixed time frame.<\/p>\n\n\n\n<p class=\"has-vivid-green-cyan-color has-text-color wp-block-paragraph\">Also Read: <a href=\"https:\/\/blog.indifi.com\/5-reasons-travel-agencies-business-loans\/\">5 Reasons For Travel Agencies To Seek Business Loans <\/a><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Borrowing_Fee\"><\/span>2. Borrowing Fee<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Another important difference between the two is the borrowing fee. With term loans, you are generally done with the fees once you\u2019ve paid the additional charges when acquiring a loan.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, with a line of credit, there is a small fee you need to pay every time you borrow money against your limit. However, term loans are known to have higher closing costs than business loans.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3_Interest_Rate\"><\/span>3. Interest Rate<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The line of credit is generally known to be cheaper than business loans with respect to the interest rate. However, if you do not use the line of credit carefully, it can prove more expensive than a business loan.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Selecting_Between_The_Two\"><\/span>Selecting Between The Two<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Apart from the differences discussed above, the decision also lies on why you need the funds. Term loans are generally considered long-term loans which are taken for purchasing major assets, like manufacturing equipment, commercial vehicles, property, etc.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Businesses often rely on the line of credit for short-term expenses, like marketing campaigns. In other words, the line of credit is generally used for activities that can help generate more revenue.<\/p>\n\n\n\n<p class=\"has-vivid-green-cyan-color has-text-color wp-block-paragraph\"><a href=\"https:\/\/www.indifi.com\">Apply For Easy Business Loans In India<\/a><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Now that you know the difference between the two, thoroughly analyze your needs to find the best term loan or line of credit. You can search for top digital lenders such as Indifi as it offers quick and easy loan products for small businesses at highly competitive rates and no extra charges with utmost convenience.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>No matter if you want to start a business or build and grow an existing one, you\u2019ll surely need a considerable amount of money. Most of the would-be and current business owners rely on financing options to secure these funds. Two of the most common options for such borrowers are the business loan and the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":599,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[141],"tags":[68,12,69,13,14],"class_list":["post-59","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-business-credit-line","tag-business-loans","tag-short-term-loans","tag-small-business-loans","tag-unsecured-business-loans"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/posts\/59","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/comments?post=59"}],"version-history":[{"count":11,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/posts\/59\/revisions"}],"predecessor-version":[{"id":5959,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/posts\/59\/revisions\/5959"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/media\/599"}],"wp:attachment":[{"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/media?parent=59"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/categories?post=59"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/tags?post=59"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}