Skip to content
Know.itKnow.it
Create an animated lesson
On request

This article is free to read. Creating a lesson uses your daily or stored credits; review the language and settings before starting.

What is a line of credit?

FinanceLesson on requestFree to read

Quick answer

A line of credit is a flexible loan that lets you borrow up to a set limit, withdraw what you need, and pay interest only on what you use. Unlike a regular loan with a fixed lump sum, you can borrow, repay, and borrow again as needed.

Key things to understand

  1. It's a flexible, reusable borrowing limit.
  2. You draw only what you need, when you need it.
  3. You pay interest only on the amount used.
  4. Repaid funds become available to borrow again.

People also ask

What is a line of credit?
A flexible loan letting you borrow up to a limit, repay, and borrow again, paying interest only on what you use.
How is a line of credit different from a loan?
A loan gives a fixed lump sum; a line of credit is a reusable limit you draw from as needed.
What's an example of a line of credit?
A credit card or a home equity line of credit (HELOC) are common examples.