Line of credit

In business, a line of credit or credit line may be regarded as an agreement by a bank or other creditor with its client. This arrangement is in terms of the amount that can be taken as a loan by the client or can be used in the future with an assumption that the client’s financial health remains stable.

For instance, a company may agree with its bank to borrow a certain amount as and when required but never more than $500,000. The commitment might underline that interest will be determined by multiplying the prime rate with the loan balance.

In the United States, numerous individuals have a home equity line of credit that lets them borrow an amount up to a certain line.