When customers apply for loans at credit institutions or banks. You will only be able to borrow money according to the limit, not as much as you want. So What is a loan limit?? You do not have the knowledge of this concept, and make borrowing more convenient. Please refer to the article below to understand better.

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## What is a limit loan?

What is a loan limit is clearly defined in Clause 4, Article 27 of Circular 39/2016/TT-NHNN on regulations and operations of lending to credit institutions and banks for customers authorized by the State bank. issued as follows.

Loan limit:

The lending organization confirms and agrees with the customer a maximum loan limit, namely the amount that can be borrowed in a certain period of time. At the lending limit, the lender makes a loan each time. At least once a year, credit institutions consider the maximum loan balance during the period of maintaining this outstanding balance.

Example of a line loan

Agribank’s loan limit is 120 million 1 month and after 1 time you repay the bank debt is 70 million and need to borrow more money. At this time, the bank will only grant you an additional loan of VND 50 million. Limit loan interest rate will depend on each bank providing and supporting customers when making loans.

## Regulations on determining the maximum loan limit

The method of borrowing capital will have different loan limits. The amount of the loan is more or less dependent on the financial condition of the customer. In which, the lenders will calculate the maximum loan limit and the minimum loan amount according to the formula.

Maximum Loan Limit = Working Capital Need – Participating Equity.

Explanation: Working capital requirement is the value of current assets minus short-term non-bank liabilities minus long-term usable debt.

This formula will be difficult to understand for those without specialized knowledge. You can understand more simply that the maximum loan limit will be based on the financial ability of the customer and the term of the loan contract.

## The benefits of borrowing money by limit

Customers borrowing money according to the limit is not without benefits. You will get many benefits that will save us a lot of time.

### Once you apply for a loan, you can apply for a loan many times

Individuals and organizations only need to make an application once, but they can use it to borrow money many times. The bank will consider and grant the limit for that 1 year. During this time, we can get a loan without having to make a new application.

The way to borrow capital by limit will be the best choice for businesses, companies that often borrow capital and always transfer capital.

### Flexible loan form

The bank will determine and calculate the exact loan limit. From there, it helps us to reduce the risks, and the loan application procedure. The bank will be able to control the loaned funds to minimize misuse.

Customers borrow money but will have to send proofs to the bank to compare with the purpose of using the borrowed capital. If the purpose is wrong, the loan will be revoked.

### Minimize loan risks

Setting a maximum loan limit will help the bank consider and minimize the risks of the loan. So when you borrow according to the limit, the risks will be minimized. Specifically, the inability to repay the bank’s debt.

You can borrow money without having to borrow up to the specified limit. The amount that can be borrowed is smaller but must not exceed the limit. Banks will have different limit regulations. So choose where to lend with the best limit.

#### Epilogue

Here you have understood What is the loan limit?? We can only borrow money according to the limit that the bank considers. If you want to borrow a large amount of money, customers will have to mortgage assets or have a high reputation.

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