Renewable credits and lines of credit differ from traditional credits. Most installment loans – mortgages, car loans or student loans – have specific purchase objectives. You have to tell the lender what you are going to use the money for in advance, and you must not deviate from it, unlike a line of credit or a revolving credit. Lines of credit are often extended to creditworthy customers by banks, financial institutions and other licensed consumer lenders (although specific lines of credit may not have solvency requirements) to meet fluctuations in the customer`s cash flow, and are also used to represent a customer`s credit limit , that is, the maximum amount of credit given to a customer. For credit cards, the line of credit is usually called a credit limit. It can be called the overdraft limit. When a lender issues a revolving credit account, it gives the borrower a certain credit limit. This limit is based on the customer`s credit score, income and credit history. Once the account is opened, the borrower can use and reuse the account at his sole discretion.

Therefore, the account remains open until either the lender or the borrower decides to close it. In India, banks offer companies cash credit accounts to finance their working capital requirements (requirements for the purchase of raw materials or “current assets” as opposed to machines or buildings called “fixed assets”). The cash credit account is similar to the current account, as it is a current account (payable on request) with a checkbook facility. However, unlike regular current accounts, which are only occasionally debited, the cash account must be debited almost continuously. The extent of the overdraft is limited to the cash limit sanctioned by the bank. This sanction is based on an assessment of the organization`s maximum working capital requirements, net of margin. The organization funds the amount of margin on its own resources. A cash loan is a short-term cash credit to a customer. A bank provides this type of financing, but only after the necessary guarantee has been given to insure the loan.

In the case of cash loans, the bank grants the customer a cash loan up to a certain limit against a loan or other guarantee.