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How to set up line of credit (overdraft) products
Introduction
Your customer needs cash urgently but doesn’t want to apply for a new loan every time. Your business borrower wants a buffer for slow months without going through a full credit process repeatedly. A line of credit solves both problems.
Unlike a traditional loan, a line of credit does not disburse a fixed amount upfront. Instead, borrowers draw funds up to a set limit whenever they need it and pay interest only on what they actually use. This makes it an ideal product for customers with recurring short-term needs or businesses that want cash on demand.
This guide walks you through how to set up a line of credit product on the Lendsqr admin console so it is ready for your customers.
Why offer a line of credit?
Lenders across different markets are adding this product to their portfolios for good reason. Here is what it delivers:
Flexibility for borrowers. Customers access funds as needed rather than taking one lump sum upfront. They borrow on their terms.
Pay for what is used. Borrowers pay interest only on the amount they draw, not the full credit limit. This makes the product more attractive and more affordable.
Customer loyalty. Offering an overdraft builds stickiness. Customers stay with lenders who give them adaptable credit solutions they can rely on.
Efficiency for lenders. Fewer repeat loan applications mean faster turnaround times and lower processing overhead for your team.
Before you begin
Line of credit only works for loan products where the disburse to setting is configured as “Wallet.” Confirm this before you start. If your product disburses to a bank account, update that setting first.
You also need admin-level access to manage loan products on the admin console
Step-by-step guide
1. Login to the Admin Console 2. Click on “Loan Products” under “Product Management“
3. Create a loan product or open an existing one
Line of credit only works for products configured with disburse to set to ‘wallet’.
4. Click on the “Product Settings” tab on the “Product Details” page.
5. Locate the “Credit Line Configuration” setting. Click on the “three-dot” icon and select “Edit” beside this setting. By default, this setting is disabled.
6. To enable the credit line, check the box Enabled to activate credit line functionality for this product, and click on the “Submit” button to apply the changes to the product.
7. Select Interest Application Strategy: This is where you define how interest will be applied to drawn amounts. You have two options:
Monthly application applies interest at the end of each month based on what the customer has actually drawn.
No application accrues interest without formally applying it to the drawn amount each month. Lenders typically use this when they want to defer interest to a later date, such as at final settlement.
8. Once you’ve selected your strategy, click Submit. Review your configuration carefully and confirm to save changes.
Your loan product is now configured as a Line of Credit (Overdraft)
Why the interest strategy you choose matters
The interest application strategy shapes how your customers experience repayment. The monthly application gives borrowers a clear picture of what they owe each month. This reduces confusion, minimizes missed payments, and builds trust in your product
No application works better in structured deals where both parties agree to defer interest to a specific settlement date. It suits more sophisticated borrowers who understand deferred interest arrangements. For most retail and SME lending contexts, a monthly application is the safer default.
