What Is a Line of Credit (LOC)?
What Is a Line of Credit?
A Line of Credit, or LOC, is money lent to an individual or business which the borrower pays interest on.
Depending on the type of LOC, the client either receives a lump sum, or is allowed to “draw against” their line of credit to make purchases, until the credit limit is reached.
Typically lines of credit are given by banks, such as when an individual is issued a credit card.
What Is a Line of Credit and How Does it Work? Revolving vs Non-Revolving
Lines of credit will either remain open, or will close, once the loan has been repaid.
Revolving lines of credit are considered “revolving”because an individual’s credit is replenished when some or all of the outstanding debt has been paid off.
In contrast, a non-revolving line of credit is closed once the account is fully paid off, such as a student loan or mortgage.
Non-revolving credit usually has a lower interest rate.
How does a Line of Credit Work? Secured vs Unsecured
Loans may be unsecured loans, or secured by collateral.
A home equity loan is an example of a collateralized loan, whereby the home is the collateral and will be claimed by the creditor in the event of a default on the loan.
Credit card loans are almost always unsecured, which causes creditors to take on more risk and is why credit card interest rates are generally higher and the borrowing limits are generally lower than secured loans.
Using Credit Lines More Responsibly
While a high line of credit can be an indicator of a business’ ability to pay, it is important to be cautious about its risks, too. Learn how you can be more responsible with your credit line by connecting to a financial advisor in Terre Haute, IN. If you live outside the area, please feel free to browse through our financial advisor page instead.
Understanding a Credit Line FAQs
Line of Credit (LOC) Subtopics
- Are There Closing Costs on a Home Equity Line of Credit?
- Bad Credit – Line of Credit
- Bad Credit – Personal Line of Credit
- Business Equity Line of Credit
- Business Line of Credit
- Business Line of Credit – Bad Credit
- Business Line of Credit Interest Rate
- Business Line Of Credit Interest Rates
- Business Line of Credit Loan
- Business Line of Credit Rates
- Business Line of Credit vs Credit Card
- Business Line of Credit vs Loan
- Business Unsecured Line of Credit
- Commercial Equity Line of Credit
- Commercial Line of Credit
- Current Interest Rates for Home Equity Line of Credit
- Do You Need an Appraisal for a Home Equity Line of Credit?
- Equity Line of Credit
- Equity Line of Credit Interest Rates
- Equity Line of Credit Loan
- Equity Line of Credit Rates
- Equity Line of Credit With Bad Credit
- Equity Loan vs Line of Credit
- Home Equity Line of Credit
- Home Equity Line of Credit – Bad Credit
- Home Equity Line of Credit Interest Rate
- Home Equity Line Of Credit Interest Rates
- Home Equity Line of Credit Loan Rates
- Home Equity Line of Credit Rates
- Home Equity Line of Credit vs Loan
- Home Equity Line of Credit vs Refinance
- Home Equity Loan vs Line of Credit
- Home Line of Credit
- Home Line of Credit Rates
- How Does a Business Line of Credit Work?
- How Does a Home Equity Line of Credit Work?
- How Does a Line of Credit Work?
- How Does an Equity Line of Credit Work?
- How Does Personal Line of Credit Work?
- How Long Does It Take to Get a Home Equity Line of Credit?
- How Long Does It Take To Get a Line of Credit Approved?
- How Much of a Credit Line Increase Should I Ask For?
- Increase Home Equity Line of Credit
- Is a Business Line of Credit a Good Idea?
- Is a Home Equity Line of Credit a Good Idea?
- Is a Line of Credit a Good Idea?
- Is It Better to Get a Home Equity Loan or Line of Credit?
- Line of Credit Home Loan
- Line of Credit Interest Rate
- Line of Credit Interest Rates
- Line of Credit Loan
- Line of Credit Loan Rates
- Line of Credit Loans for Bad Credit
- Line of Credit Rates
- Line of Credit vs. Loan
- Line of Credit vs Loan
- Online Line of Credit for Bad Credit
- Overdraft Line of Credit
- Personal Line of Credit
- Personal Line of Credit Interest Rate
- Personal Line of Credit Interest Rates
- Personal Line of Credit Loans
- Personal Line of Credit Rates
- Personal Line of Credit vs Credit Card
- Personal Line of Credit vs Loan
- Personal Loan vs Line of Credit
- Personal Loan vs Line of Credit
- Personal Secured Line of Credit
- Rates for Home Equity Line of Credit
- Rates on Business Line of Credit
- Revolving Line of Credit
- Revolving Personal Line of Credit
- Secured Business Line of Credit
- Small Business Line of Credit
- Small Business Line of Credit Bad Credit
- Small Business Line of Credit – No Personal Guarantee
- Unsecured Business Line of Credit
- Unsecured Business Line of Credit Without Personal Guarantee
- Unsecured Line of Credit Loans
- Unsecured Line of Credit Rates
- Unsecured Personal Line of Credit
- Unsecured Revolving Line of Credit
- What Are the Disadvantages of a Home Equity Line of Credit?
- Business Line of Credit
- What Is a Personal Line of Credit
- What Is a Personal Line of Credit Loan
- Which Is Better: Home Equity Loan or Line of Credit?
- What Is the Average Interest Rate on a Home Equity Line of Credit?
- What Is the Current Interest Rate on a Home Equity Line of Credit?
- The Difference Between a Personal Loan and a Line of Credit
- Business Line of Credit – No Personal Guarantee

About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.