What is a Line of Credit?

Line of Credit Definition

A line of credit is similar to a loan, but it is not made available to you as a single lump sum the way a loan is. Instead, it is similar to a credit card in that you can spend it in smaller increments here and there. You generally only pay interest on the amount of the line of credit that you have spent, allowing you to save money if you do not spend the entire amount. Note that lines of credit have draw and pay periods. The interest on the money rises after the draw period closes.


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