What Is Cash Credit- Benefits, Downsides, Hidden Charges In 2022

Are you a business owner or a normal individual? I think you need a loan to fulfill your personal needs or your business needs. If you want cash credit for any reason, this 5-minute article can help you so much because we have covered everything about cash credit loans like what is cash credit loan, the benefits of cash credit, the downsides of cash credit loans, and most important charges, limits & hidden charges of cash credit account.

I know if you are a business owner then you must need capital to run your business because “money for business is like fuel for a vehicle”, that’s why some banks are giving you this fuel as a loan. There are a lot of things about this cash credit loan that we will talk about forward. So let’s start with a short introduction of what is cash credit.

WHAT IS CASH CREDIT? (CASH CREDIT MEANING)

In simple words, Cash Credit is a short-term loan for SME(small-medium enterprises) businesses. Banks are providing this loan to fulfill the working capital requirements of SME businesses.

If you want to know “what is cash credit?” The first thing you must know is the cash credit loan is for businesses, not for individuals. And if you want to know what Cash Credit Means, so cash credit means “short-term loan for SME business.”

Now you may ask what this loan is exactly for so the answer is, “this loan is exactly to fulfill the requirements for working like raw materials, products, and liabilities.” Most of the SME businesses don’t have money to purchase raw materials and other things. That’s why some banks are providing you with this loan at lower interest rates.

If you are a person and not an SME business owner, you can’t get cash credit.

BENEFITS OF CASH CREDIT LOAN(What is cash credit)

1. Cash credit is a secured loan, the bank gives this loan against your current purchases, inventory, and receivables.
2. You will get a different cash credit account with an unlimited transactions limit & the bank will also provide you with a checkbook for better convenience.
3. As you know the purpose of cash credit is to help your business requirements that’s why they are charging lower interest rates. We will talk about it forward.
4. Small but really helpful benefit, you can immediately change your withdrawal limit of cash credit. Suppose if your value of inventory and liabilities increases, you can immediately change your credit limit by showing this increment.
5. The most helpful benefit that will blow your mind, there are no other charges instead of interest rates in cash credit. As you know, banks apply a lot of hidden charges in loan amounts but cash credit doesn’t charge you any other charge. Also, the interest rate of cash credit is lower than an overdraft.

DOWNSIDES OF CASH CREDIT LOAN

You can’t get this loan for personal use, this loan is strictly made for SME businesses. Even large businesses will not be approved for cash credit loans. If you want a loan for your reasons, you should check the overdraft facility.

CHARGES & LIMITS OF CASH CREDIT ACCOUNT(what is Cash Credit)

• The maximum limit of cash credit is approximately 50 to 60% of the total value of inventory and liabilities.
• The maximum duration of your cash credit limit is 1 year. After 1 year, your limit of cash credit loan will change according to your liabilities, purchases & inventory.
• If you talk about interest rates then the approximately per annum interest rate is 11 %. This interest rate of ICICI Bank’s cash credit and the other banks charge differently, even some banks charge very low of it.

MY OPINION & CONCLUSION(What is cash credit)

If you have a small or medium business & you need some capital to buy raw materials and fulfill the basic working requirements. You must go for cash credit, also now you know what cash credit is.

But if you want a loan for yourself or other reasons, you can’t get this loan. even the bank will not verify you to get this cash credit loan. We suggest you go with overdraft because overdraft is for personal requirements.

The one thing that you must take in mind before applying for cash credit in any bank. Mast check the interest rates in the banks & go for the bank that is charging lower interest rates. That’s how you can find the best cash credit for you.