Introduction to Lines of Credit

A line of Credit is defined as "An informal loan arrangement between a bank and a customer allowing the customer to borrow up to a prespecified amount"

Revolving credit is a type of credit that does not have a fixed number of payments, in contrast to installment credit.

Typical characteristics

* The borrower may use or withdraw funds up to a pre-approved credit limit.
* The amount of available credit decreases and increases as funds are borrowed and then repaid.
* The credit may be used repeatedly.
* The borrower makes payments based only on the amount they've actually used or withdrawn, plus interest.
* The borrower may repay over time (subject to any minimum payment requirement), or in full at any time.

The concept of a revolving line of credit is to combine the best features of a credit card, personal loan and a cheque account in the one product. Typically money can be accessed in a number of ways including, ATM's, Internet banking, Bpay, Phone & Internet Banking and even by cheque.

For additional information on credit cards or related topics please visit our library of credit card articles.