Credit Lines

Written by Robert Mac
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Credit lines are arrangements that allow a borrower to receive something of value (credit) from a lender and repay it later. Generally, the borrower does not offer collateral; it is unsecured credit. By offering a credit line, lenders allow the borrower a certain amount of flexibility in determining exactly how they will use or distribute their credit.

Rather than a personal loan--which is a lump sum--credit lines allow you to borrow whenever you want. And as long as you've already established an account and don't have any debt-related issues or other financial red flags, you can borrow up to your limit. Once you've repaid what you've borrowed, you can borrow any part of your limit again and again.

Credit Lines Are for Businesses, Too

While a home equity credit line is a popular source of consumer credit, lines of credit are also used by businesses. A small business owner, for example, can use a line of credit to finance the expansion of a business or cover start-up expenses. Since this credit is typically unsecured, your credit limit is based on your business track record and credit history.

With an established line of credit in place, you can either get your business off its feet or on the run. You can increase your cash flow, repay debts, and better manage your interest payments. And since it's credit, rather than a loan, you are free to spend it towards whatever your business's needs dictate.


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