line of credit

A line of credit, also known as a credit line, is a financial agreement that allows a borrower to access funds up to a predetermined maximum amount. This flexible borrowing arrangement is established by a lender, such as a bank, and provides the borrower with a set credit limit. The borrower can draw funds as needed, up to this limit, and typically repays the borrowed amount along with interest. This differs from a traditional loan where a lump sum is disbursed at once. The maximum credit allowed is the key feature of this financial tool.12