line of credit

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Line of credit

An informal loan arrangement between a bank and a customer allowing the customer to borrow up to a prespecified amount.

Line of Credit

An agreement between a bank and a company or an individual to provide a certain amount in loans on demand from the borrower. The borrower is under no obligation to actually take out a loan at any particular time, but may take part of the funds at any time over a period of several years. This agreement is fairly common in situations in which a business must make payroll but does not always have the operating income to do so, especially when its operating income is seasonal or otherwise varies from month to month. It is also called open-end credit or a revolving line of credit. See also: Credit Card.

line of credit

A credit arrangement in which a financial institution agrees to lend money to a customer up to a specified limit. A line of credit, generally arranged before the funds are actually required, provides flexibility for the customer in that it ensures the ability to meet short-term cash needs as they arise. Also called bank line, credit line, revolver, revolving credit agreement.

Line of credit.

A line of credit, sometimes called a bank line, is the most you can borrow under a revolving credit arrangement with a credit card issuer, bank, or mortgage lender.

When you borrow against a line of credit, you pay interest on the amount of money you actually borrow, not on the available balance, or full amount you are able to borrow.

For example, if you have a $10,000 line of credit on a credit card, you may borrow as much or as little as you want up to that amount, and you pay interest only on the amount you have borrowed.

If you carry a balance of $3,000, you only pay interest on that amount, but there is still $7,000 available for you to borrow. Once you repay the amount you borrow, you can use it again.

A line of credit may be secured with collateral, or unsecured. A line of credit on a credit card is usually unsecured, for example. But if you have a home equity line of credit, your home serves as collateral against the amount you borrow.

line of credit

A revolving loan issued by a financial institution;it may be secured by a mortgage or other collateral, or unsecured.The borrower may draw down the line, up to the maximum limits, at any time and pay interest each month. If the principal is repaid during the time period of the line, then the maximum amount or any lesser amount may be drawn down again.Lines of credit are typically for one year, and then extended from year to year afterward. If a borrower draws down the maximum amount and then does not repay any of the principal,the lender will eventually refuse to renew the note and may require payment in full or conversion to an amortizing loan with regular monthly payments that will eventually pay it in full.Lines of credit are best used by persons with reliable income arriving at sporadic times or by persons awaiting the sale of an asset but needing cash in the meantime.

References in periodicals archive ?
8 July 2011 - ICRA yesterday set a B+ rating to the INR110m (USD2.5m/EUR1.7m) bank lines of Indian construction company Sukhwani Associates.
BANKING AND CREDIT NEWS-July 21, 2011--Kakinada Seaports ratings on bank lines remain unchanged - ICRA(C)2011 M2 COMMUNICATIONS http://www.m2.com
10 June 2011 - ICRA rated yesterday the INR380m (USD8.5m/EUR5.9m) fund-based bank lines of Indian electric pumps manufacturer Oswal Pumps Ltd at LBB+/"stable".
BANKING AND CREDIT NEWS-July 8, 2011--ICRA rates Sukhwani Associates' bank lines at B+(C)2011 M2 COMMUNICATIONS http://www.m2.com
M2 EQUITYBITES-May 23, 2011--CARE rates bank lines of Chincholi Sugar and Bio Industries at A-(SO)(C)2011 M2 COMMUNICATIONS http://www.m2.com
BANKING AND CREDIT NEWS-June 30, 2011--Bentex Control & Switchgear's bank lines get ratings of BB/P4+ - CRISIL(C)2011 M2 COMMUNICATIONS http://www.m2.com
M2 EQUITYBITES-April 28, 2011--ICRA affirms LBBB/"stable"/A2 ratings on bank lines of Brintons Carpets Asia(C)2011 M2 COMMUNICATIONS http://www.m2.com
BANKING AND CREDIT NEWS-June 27, 2011--CRISIL rates bank lines of Small Tiles at B/P4(C)2011 M2 COMMUNICATIONS http://www.m2.com
M2 EQUITYBITES-April 18, 2011--ICRA cuts rating on bank lines of Raus Infras to LBB-(C)2011 M2 COMMUNICATIONS http://www.m2.com
8 April 2011 - ICRA said Thursday it had retained the ratings on Delhi International Airport Private Limited's (DIAL) bank lines at LBBB/A3+.
BANKING AND CREDIT NEWS-June 10, 2011--ICRA rates Oswal Pumps' bank lines at LBB+/"stable"(C)2011 M2 COMMUNICATIONS http://www.m2.com
M2 EQUITYBITES-April 8, 2011--ICRA keeps ratings on Sunair Hotels' bank lines at LBBB+/A2+(C)2011 M2 COMMUNICATIONS http://www.m2.com