In today’s world, finance and banking terms are becoming increasingly complex and confusing for the common man. One such term that has gained popularity in recent years is OC or Open Credit. In this article, we will explore what OC means, its full form, and how it is used in the finance industry.
What is OC?
Open Credit or OC is a type of credit facility offered by banks or financial institutions to individuals or businesses. It is a pre-approved loan amount that is sanctioned by the bank, which the borrower can use at any time as per their requirement.
What is the full form of OC?
The full form of OC is Open Credit.
How does OC work?
OC works like a credit card, where the borrower is given a pre-approved credit limit that they can use as per their requirement.
The interest is charged only on the amount used by the borrower, and not on the entire credit limit sanctioned. The borrower has to pay back the borrowed amount along with the interest charged on it.
Types of OC
There are two types of OC – unsecured and secured.
Unsecured OC
In unsecured OC, the borrower is not required to provide any collateral or security to the bank or financial institution. The interest rates on unsecured OC are generally higher than secured OC.
Secured OC
In secured OC, the borrower is required to provide collateral or security to the bank or financial institution. The interest rates on secured OC are generally lower than unsecured OC.
Difference between OC and OD
Overdraft (OD) is another type of credit facility offered by banks or financial institutions. The main difference between OC and OD is that OC is a pre-approved loan amount, whereas OD is a credit facility provided by the bank against a current account.
OD is generally offered to businesses for their working capital requirements, whereas OC is offered to both individuals and businesses.
Advantages of OC
Some of the advantages of OC are:
- Quick access to funds
- Interest is charged only on the amount used
- Flexible repayment options
- Can be used for various purposes
Disadvantages of OC
Some of the disadvantages of OC are:
- Higher interest rates compared to other types of loans
- Overuse of OC can lead to a debt trap
- Non-repayment can lead to a negative impact on credit score
How to apply for an OC?
To apply for an OC, the borrower needs to visit the bank or financial institution’s website or branch and fill in the application form. The bank or financial institution will check the borrower’s credit score and eligibility criteria before approving the OC.
Documents required for OC
The documents required for an OC may vary from bank to bank or financial institution to financial institution. However, the common documents required are:
- Identity proof
- Address proof
- Income proof
- Bank statements
Eligibility criteria for OC
The eligibility criteria for OC may vary from bank to bank or financial institution to financial institution. However, the common eligibility criteria are:
- Age: The borrower should be at least 21 years of age and not more than 65 years of age.
- Credit score: The borrower should have a good credit score.
- Income: The borrower should have a stable income source.
OC vs Credit Card
OC and credit cards are both types of credit facilities offered by banks or financial institutions. The main difference between the two is that OC is a pre-approved loan amount, whereas credit cards are a revolving credit facility.
In OC, the interest is charged only on the amount used, whereas in credit cards, the interest is charged on the entire credit limit sanctioned. The interest rates on credit cards are generally higher than OC.
OC vs Loan
OC and loans are both types of credit facilities offered by banks or financial institutions. The main difference between the two is that OC is a pre-approved loan amount, whereas loans are sanctioned after the borrower submits a loan application form and the bank or financial institution approves it. The interest rates on loans are generally lower than OC.
Conclusion
In conclusion, OC or Open Credit is a type of credit facility offered by banks or financial institutions to individuals or businesses. It is a pre-approved loan amount that the borrower can use as per their requirement.
There are two types of OC – unsecured and secured. The borrower has to pay back the borrowed amount along with the interest charged on it. While OC has its advantages, overuse can lead to a debt trap, and non-repayment can negatively impact the credit score.
FAQs
- Can I use OC for any purpose?
- Yes, you can use OC for any purpose.
- What is the maximum loan amount sanctioned under OC?
- The maximum loan amount sanctioned under OC may vary from bank to bank or financial institution to financial institution.
- What is the interest rate charged on OC?
- The interest rate charged on OC may vary from bank to bank or financial institution to financial institution.
- Can I prepay my OC loan?
- Yes, you can prepay your OC loan.
- How long does it take for the OC loan to be sanctioned?
- The time taken for the OC loan to be sanctioned may vary from bank to bank or financial institution to financial institution.