There are different types of loan facilities offered by lending institutions. These loan facilities are formal financial assistance program offered by a lending institution to aid a company that needs operating capital. The different types of loan facilities available includes overdraft services, deferred payment plans, lines of credit, revolving credit, term loans letters of credit and swingline.
Facility Vs Loan |Credit Facilities\ Loan Facilities
Since banks specialize in offering financing to their customers, the various options offered in the market include loans and lines of credit. These two, are the most commonly used products for both individuals as well as companies. Be it as it may, sometimes there’s no clear differentiation between loans and credit facilities, but in reality these two provide different ways to help you access the financing you want.
Both loans and credit facilities make a certain amount of capital available to the customer, with the only difference being the way they work and the situations they are suitable for.
Loan facilities provides access to all of the requested money at once when a loan is granted.
On a loan, you have to pay interest on all the capital loaned.
Loan comes with longer repayment periods that maybe upwards to a number of years. This implies that the interest charged on them is higher.
For loans, when all the money owed has been paid back through monthly payments that operation is as good as closed. Thus, without the access of borrowing more money except a new loan is taken out.
Credit money can be requested whenever a need for liquidity comes up. This implies that a credit facility allows you withdraw money gradually only when you need it and you don’t have to use all the available funds.
With facility, you get to pay interest only on the money you have used. This means you don’t have to pay interest on the bulk sum that the bank has made available to you. Although, it is possible to be subject to an unused fee, or call it a fee charged on the money you have not used.
When it comes to repayment, the way a credit facility works is quite different. A credit facility is renewed every year, which enables the customer to continue using the line of financing whenever he/she deems fit.
In case you have a significant purchase to make, you can go for loan. Loan can also be accessed when the amount of money needed is known before hand.
If you want an occasional source of support for expenses that come up unexpectedly, you can opt for a credit facility instead.