Meaning & use
line of credit
Last updated
Meaning
nouncountablefinance
A flexible borrowing agreement with a bank that lets you take money as needed, up to a fixed limit, and pay interest only on what you use.
Grammar: Countable: apply for a line of credit, open two lines of credit.
Patterns
- a line of credit from someone
- draw on a line of credit
The bakery used a line of credit to buy flour during the slow months.
She opened a line of credit with her bank to cover home repairs.
Interest on a line of credit applies only to the amount you draw.
Word forms
| plural | lines of credit |
|---|
Common combinations
- open a line of credit
- They opened a line of credit before starting the renovation.
- draw on a line of credit
- He drew on his line of credit to pay the supplier.
- a home equity line of credit
- A home equity line of credit uses your house as security.
- extend a line of credit
- The bank agreed to extend a line of credit to the business.
- credit limit
- Your line of credit has a limit of ten thousand dollars.
Synonyms and how they differ
- credit facility
- A more formal business term, often for larger company arrangements.
- overdraft
- Usually linked to a checking account and mostly a British term for short-term borrowing.
Word family
Commonly confused: line of credit or loan?
line of credit vs loan
A loan gives you a fixed amount at once; a line of credit lets you borrow and repay repeatedly up to a limit.
Practice
What makes a line of credit different from a standard loan?
Choose one answer.
A line of credit is revolving: you draw funds when needed. The first option describes a standard loan, and the others are untrue.
Make it your own
Write a sentence using “line of credit”, then check it and compare it with the examples above.