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Line of credit
Line of Credit
line of credit
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.