When your business needs funding, choosing the right type of loan is just as important as the amount you borrow. Two popular options in India are Term Loans and Business Lines of Credit — each serving different financial needs.
In this guide by Vizzve Finance, we break down the differences, benefits, and scenarios where one works better than the other
🔍 What Is a Term Loan?
A term loan is a fixed amount of money borrowed for a specific purpose, with regular EMIs over a set tenure.
✅ Key Features:
Fixed loan amount
Monthly EMIs with interest
Tenure: 1 to 10 years
Often used for equipment, expansion, property, or infrastructure
📌 Best For:
Long-term projects
Equipment/machinery purchase
Business expansion
🔁 What Is a Line of Credit?
A business line of credit (LOC) offers a revolving credit limit that you can draw from as needed — and pay interest only on the used amount.
✅ Key Features:
Flexible withdrawal and repayment
Interest charged only on used credit
Reusable limit
Ideal for managing working capital
📌 Best For:
Seasonal cash flow gaps
Inventory restocking
Emergency expenses
⚖️ Term Loan vs Line of Credit: Quick Comparison
| Feature | Term Loan | Line of Credit |
|---|---|---|
| Purpose | One-time large expense | Ongoing or fluctuating needs |
| Disbursal | Lump sum | Withdraw as needed |
| Interest | On total amount | Only on amount used |
| Repayment | Fixed EMIs | Flexible |
| Tenure | 1 to 10 years | Revolving |
| Ideal For | Asset purchase, expansion | Short-term working capital |
🧠 How to Choose the Right One?
👉 Choose a Term Loan if:
You have a specific business goal (e.g., new outlet, major machinery)
You can predict the exact funding requirement
You're okay with fixed EMIs
👉 Choose a Line of Credit if:
Your income is seasonal or variable
You want cash flow flexibility
You prefer paying interest only when needed
💡 Pro Tip from Vizzve Finance:
When in doubt, use Vizzve’s smart platform to:
Compare pre-approved term loans and lines of credit
Check interest rates, fees, and flexibility
Get matched with RBI-registered lenders only
🙋 FAQs
Q1. Can I have both a term loan and a line of credit?
Yes. Many businesses use both — one for expansion, the other for working capital.
Q2. Is a line of credit cheaper than a term loan?
It can be, if you don’t use the entire limit. You only pay interest on the amount drawn.
Q3. Are these loans secured or unsecured?
Both are available in secured and unsecured forms. Vizzve helps you explore both options.
Q4. What’s the processing time via Vizzve?
Approvals usually happen within 48–72 hours, depending on the lender and documents.
Q5. Will a line of credit affect my credit score?
Yes. Like any credit product, your usage and repayments are reported to credit bureaus.
published on 2nd july
Publisher : SMITA
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RBI-Registered Loan Partner | 10 Lakh+ Customers | ₹600 Cr+ Disbursed.