What are the primary features of Cash Credit Loans?

Here are some of the primary features of Cash Credit Loans:

• Short-Term Loan: Cash credit loans are typically sanctioned for a short period of 12 months or less.
• Revolving Facility: Within the sanctioned credit limit, an applicant can withdraw money multiple times without separate applications.
• Interest on Utilised Amount: Interest is charged only on the amount withdrawn, not on the full sanctioned amount.
• Flexible Repayment: Depending on cash flows, the applicant can pay interest monthly, quarterly, or half-yearly.
• Collateral Required: Banks of NBFCs (Non-banking Financial Companies) generally obtain collateral or security in the form of stocks, book debts or property before disbursing the loan.
• Credit Score Impacts Limit: Higher credit score and good repayment history can result in higher sanctioned limit for cash credit loan.
• Considers Business Turnover: The sanctioned limit is determined based on annual business turnover and working capital cycle.
• Tax Benefits: The interest paid is tax deductible, providing potential tax savings.
• Available Against FDs: Individuals can also avail cash credit loans against their fixed deposits up to a certain % of FD value.