Definition
A line of credit is a type of revolving credit account that may be drawn upon up to the credit limit, in which payments made toward the balance may be immediately reborrowed.
Analysis
A line of credit may be a cash access account such as a home equity line of credit (HELOC), or it may be a type of credit card account, in which a credit card may be used in transactions that draw from a revolving credit account. Some lines of credit are secured, while others are unsecured.
A line of credit represents a previously authorized amount of credit that may be drawn upon as the borrower sees fit. The borrower may draw down the line of credit up to the credit limit. Any withdrawals, fees or finance charges will reduce the available credit. Payments and credits to the account will restore available credit by equal amounts.
