Line Of Credit - LOC

AAA

DEFINITION of 'Line Of Credit - LOC'

An arrangement between a financial institution, usually a bank, and a customer that establishes a maximum loan balance that the bank will permit the borrower to maintain. The borrower can draw down on the line of credit at any time, as long as he or she does not exceed the maximum set in the agreement.

INVESTOPEDIA EXPLAINS 'Line Of Credit - LOC'

The advantage of a line of credit over a regular loan is that interest is not usually charged on the part of the line of credit that is unused, and the borrower can draw on the line of credit at any time that he or she needs to. Depending on the agreement with the financial institution, the line of credit may be classified as a demand loan, which means that any outstanding balance will have to be paid immediately at the financial institution's request.

VIDEO

RELATED TERMS
  1. Clean-Up Requirement

    A requirement that is often written into the contracts of annually ...
  2. Evergreen Loan

    A loan that does not require the principal amount to be paid ...
  3. Consumer Credit

    A debt that someone incurs for the purpose of purchasing a good ...
  4. Open-End Credit

    A pre-approved loan between a financial institution and borrower ...
  5. Cash Advance

    A service provided by many credit card issuers allowing cardholders ...
  6. Accordion Feature

    A type of option that a company can buy that gives it the right ...
Related Articles
  1. Credit & Loans

    What information do lenders need when ...

  2. Credit & Loans

    What's On A Consumer Credit Report? ...

  3. Retirement

    How To Invest When You're Deep In Debt

  4. Options & Futures

    Home-Equity Loans: The Costs

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center