UPI Credit Line: All You Need To Know

Now, most of us use Unified Payment Interface (UPI) payments for almost everything- from paying at a coffee shop to paying for groceries. However, UPI can also help you to get a loan. 

The credit line on UPI is essentially a line of credit (LOC) for personal loans. “Historically, LOC personal loans were used by businesses and very rarely for personal use. The LOC on UPI extends access to a pre-sanctioned credit line to retail customers as well,” says  Pankaj Bansal, CBO, BankBazaar.com, a fintech portal. 

How It Works 

One can access UPI credit lines through the same UPI app you use for making payments and transfers. Within the app, there’s usually a section dedicated to financial services where you can find options like 'Credit' or 'Loan'. 

“When you apply for a UPI credit line, the app evaluates your creditworthiness based on factors like your transaction history, income level, and payment behaviour. Unlike traditional loans that may take time for approval and paperwork, UPI credit lines often offer instant approval if you meet the criteria set by the lender. This means you can get access to funds quickly,” says Atish Shelar, COO of Tech Fini, a fintech firm. 
 

Once approved, you’re assigned a credit limit, which is the maximum amount you can borrow from the credit line. This limit varies based on your profile and the lender’s policies. You can borrow money instantly up to your approved credit limit. “The borrowed amount is transferred directly to your bank account linked with the UPI app. Since they are integrated with UPI, repayments can be automated or easily managed through the same app used for borrowing,” says Shelar. 

Moreover, interest charges vary among lenders and apply to borrowed amounts, additional fees like processing or late payment fees may also apply, so understanding these charges beforehand is crucial. “UPI credit lines are convenient because you can manage borrowing and repayment directly through the familiar UPI app interface,” says Shelar. 

If you opt for an LOC on UPI, make sure you understand the repayment terms, including the duration, minimum payment due, and late payment penalties clearly. “Also bear in mind that the interest rates and any additional fees associated with the credit line can vary significantly between providers and may be higher than conventional credit options,” says Bansal. 

Stay Safe 

However, when accessing a credit line on UPI, one needs to keep certain safety aspects in mind. 

For instance, it’s best to always use two-factor authentication (2FA) wherever possible. One must also be wary of phishing attempts. Scammers often try to lure you in via emails, messages, or calls and urge you to reveal sensitive personal information. “So, it’s imperative to remain unresponsive to them or raise a complaint, either with your network provider or the cybercrime division.  Monitor your accounts and bank statements regularly to ensure there aren’t any unauthorised transactions,” says Shikhar Aggarwal, Chairman of BLS E-Services, a digital. 

“Further, educating yourself on the latest fraudulent activities and scam tactics is one of the easiest ways to identify suspicious activity,” says Aggarwal. 

By staying informed and cautious, you can enjoy the seamless convenience of digital transactions while protecting your finances.