KEYTAKEAWAYS
Discover the Line of Credit, a flexible financial agreement allowing borrowers to access funds up to an approved limit as per their needs and convenience.
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DEFINITION
Line of Credit – Flexible Borrowing Arrangement
A line of credit is a financial agreement that provides borrowers with the flexibility to access funds from a pre-approved account, up to a specified limit. Unlike traditional loans, where borrowers receive a lump sum upfront, a line of credit allows individuals and businesses to withdraw money as needed, within the established credit limit.
This arrangement offers a convenient and versatile way to manage short-term or unexpected financial needs, with interest typically only accruing on the amount borrowed. It can be secured by assets or provided as an unsecured credit facility, and the terms and interest rates can vary based on the lending institution and the borrower’s creditworthiness.
Understanding how a line of credit works is essential for financial planning and managing cash flow effectively, whether for personal or business purposes.
