Finance
What is A line of credit?
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.
See it, don’t just read it.
Watch a 2-minute lesson with voice + animation that explains a line of credit.
Key things to understand
- 1It's a flexible, reusable borrowing limit.
- 2You draw only what you need, when you need it.
- 3You pay interest only on the amount used.
- 4Repaid funds become available to borrow again.
Frequently asked questions
- 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.