Credit line

A credit limit is the monetary limit from which a credit is granted.

This means that if you have a credit limit of DKK 50,000, this is the maximum amount of credit you have.

Credit limit is also referred to as credit maximum, credit limit or credit max.

In practice, however, the term credit limit is perhaps most commonly used when granting ongoing credit, such as bank loans, while credit limit and credit limit are often used for credit purchases. Legally, however, there is no difference between the terms.

What is the purpose of a credit line?

The purpose of a credit limit is to ensure a maximum amount of credit a debtor or borrower has.

In other words, the credit limit helps to reduce the lender's risk when lending money.

The credit limit should never be set so high that the company does not experience significant losses if a debtor or borrower goes bankrupt, dies or cannot pay their installments for a shorter or longer period.

What is the right credit limit?

When banks and other lenders provide credit, it often always comes with a credit limit.

This helps to secure the financial framework and terms of the credit - but also to reduce the lender's risk.

Finding the right credit line is often difficult, and banks and lenders spend huge amounts of money every year developing systems, frameworks and processes for determining the right credit lines.

Credit limits are individual and depend on everything from the purpose of the credit, the credit need and not least the debtor's financial situation, industry etc.

If you are a business and want to set a credit limit for your customers, you should include elements such as public accounting information, previous history with the customer, their industry, etc.

Get help determining the right credit limit

If you are a business owner and want the best credit terms for yourself and your customers, they should always be included in your company's credit policy.

By writing the credit limit into the company's credit policy, you ensure that everyone in the company knows your credit policies.

With Qatchr, you get an online tool that helps you determine the right credits and credit limits for your customers.

Our online tool considers a wide range of parameters when determining the credit limit. This gives you a much better basis for a more accurate credit limit for your customers.