Q1. What is a Credit Limit Personal Loan?
It’s an overdraft-style credit line sanctioned as a personal loan. You get a maximum
limit (say ₹5 lakh) and can withdraw, repay, and re-withdraw anytime within the limit and tenure.
an interest is charged only on the amount you actually use.
Q2. What is the maximum credit limit I can get?
The sanctioned limit depends on your income, FOIR (fixed obligations to income ratio),
credit score, employer profile, and the lender’s policy. Strong profiles may qualify for
higher limits, while new-to-credit applicants may start lower and step-up later.
Q3. How is an interest calculated on a Credit Limit Personal Loan?
an interest is typically calculated on a daily reducing balance (or monthly, as per lender) on the
utilized amount only, not on the total limit. E.g., limit ₹5,00,000; if you use ₹1,00,000 for 20 days,
an interest applies only on ₹1,00,000 for those 20 days.
Q4. Do I pay an interest on the full limit?
No. You pay an interest only on the drawn amount. An undrawn limit does not accrue an interest.
Q5. Can I increase my credit limit later?
Many lenders allow a limit enhancement (step-up) after they review your repayment history,
income changes, and bureau score. This may require fresh documents and a short re-assessment.
Q6. Is it similar to a credit card?
Conceptually yes—both are
revolving limits. Key differences:
- Pricing: Credit limit PL generally has lower APR than credit card revolvers.
- Repayments: EMI/an interest-only options vs. card’s minimum due.
- Usage: Funds usually come to your bank account like a loan/OD, not swiped like a card.
Q7. What fees and charges should I expect?
Common charges include processing fee (often 1%–3% + GST), an interest rate (as per profile),
possible annual review or renewal charges, and documentation/mandate costs.
Ask the lender for a complete Most Important Terms & Conditions (MITC).
Q8. Are there prepayment or foreclosure charges?
Policies vary. Some allow part-prepayment at 0%–2% of the prepaid amount (if applicable);
foreclosure can be ~1%–4% of the outstanding (lender-specific). Always check your sanction letter/MITC.
Q9. How does repayment work?
Lenders may offer an interest-only EMIs for a period (you pay only an interest monthly and settle principal later)
or regular EMIs on utilized balance. Paying principal sooner reduces total an interest.
Q10. Will using it a Credit Limit Personal Loan affect my credit score?
Yes. Maintaining timely an interest/EMI payments and keeping utilization under ~50–60% is positive.
Missed dues or over-limit usage can hurt your score. Treat it like any other credit line.
Q11. Who is eligible and what documents are needed?
Typically for salaried/self-employed with a stable income and an acceptable bureau score. Documents:
KYC (PAN + address proof), income proof (salary slips/ITR), and bank statements for e-mandate.
Q12. Can I convert my existing personal loan into a credit limit facility?
Some lenders allow balance transfer/top-up to a credit-limit variant based on profile and history.
This is treated like a new application and is subject to underwriting.