Line of Credit

A line of credit is a revolving loan arrangement between a financial institution and a borrower. Credit lines feature predetermined credit limits and variable interest rates, and can be drawn upon, repaid, and drawn upon again.

That said, borrowers are usually required to make minimum ongoing interest payments on their lines of credit to remain in good standing. Principal, meanwhile, can be repaid at any time.

Examples of credit lines include secured lines of credit, unsecured lines of credit, home equity lines of credit (HELOCs), and personal lines of credit. Financial institutions take into account a borrower’s credit score, income and financial records like debt-to-income levels before issuing a line of credit.