Revocable Line Of Credit

AAA

DEFINITION of 'Revocable Line Of Credit'

A source of credit provided to an individual or business by a bank or financial institution, which can be revoked or annulled at the lender's discretion or under specific circumstances. A bank or financial institution may revoke a line of credit if the customer's financial circumstances deteriorate markedly, or if market conditions turn so adverse as to warrant revocation, such as in the aftermath of the 2008 global credit crisis. A revocable line of credit can be unsecured or secured, with the former generally carrying a higher rate of interest than the latter.

INVESTOPEDIA EXPLAINS 'Revocable Line Of Credit'

Notwithstanding its revocable nature, such a line of credit offers a bank's clients financial flexibility since interest is paid only on the actual amount of funds drawn down. Another attractive feature of this line of credit is its revolving nature, with the full amount being available to the client once all advances under it have been repaid.


Home Equity Lines of Credit (HELOCs) were very popular in North America during the real estate boom of 2002-06. However, as housing prices collapsed and homeowners' equity shrank drastically, some lenders increasingly resorted to reductions and revocations of such credit facilities.

RELATED TERMS
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a ...
  2. Home Equity Line Of Credit - HELOC

    A line of credit extended to a homeowner that uses the borrower's ...
  3. Revocable Trust

    A trust whereby provisions can be altered or canceled dependent ...
  4. Revolving Credit

    A line of credit where the customer pays a commitment fee and ...
  5. Line Of Credit - LOC

    An arrangement between a financial institution, usually a bank, ...
  6. Operating Cost

    Expenses associated with administering a business on a day to ...
RELATED FAQS
  1. What is the prime cost formula?

    The term "prime cost" refers to the direct costs of manufacturing an item. It is calculated by adding the cost of raw materials ... Read Full Answer >>
  2. How can I lower my effective tax rate without lowering my income?

    There are lots of ways to lower your effective tax rate, although your individual circumstances determine whether you can ... Read Full Answer >>
  3. How does the use of International Financial Reporting Standards (IFRS) affect key ...

    While much has been achieved since 2002 in convergence between international financial reporting standards (IFRS) and U.S. ... Read Full Answer >>
  4. What is the justification for allowing deferred tax liabilities?

    A deferred tax liability tracks the temporary difference that arises between a company's income taxes that will be due in ... Read Full Answer >>
  5. How is overhead distributed through total absorption costing?

    Through total absorption costing, overhead is distributed into indirect costs incurred from the manufacturing and production ... Read Full Answer >>
  6. What are the differences between absorption costing and variable costing?

    Absorption costing includes all costs, including fixed costs, in figuring the cost of production, while variable costing ... Read Full Answer >>
Related Articles
  1. Options & Futures

    How To Establish A Credit History

    Can't get a credit card without a credit history, and can't get a history without a card? Break the Catch-22.
  2. Options & Futures

    Home-Equity Loans: What You Need To Know

    We shed light on why consumers decide to use this form of debt and whether it is a good alternative.
  3. Credit & Loans

    Protect Yourself From HELOC Fraud

    Identity thieves are using home equity lines of credit to commit their crimes.
  4. Options & Futures

    Different Needs, Different Loans

    Find out what options are available when it comes to borrowing money.
  5. Investing Basics

    Explaining Write-Downs

    A write-down is a reduction in the book value of an asset because it is overvalued compared to the market value.
  6. Credit & Loans

    What is an Unsecured Loan?

    An unsecured loan is based on the creditworthiness of the borrower, and has no collateral securing the loan.
  7. Home & Auto

    What Are The Tax Advantages Of Buying A Home?

    Don't forget these deductions and credits that homeowners can use to reduce their tax bill.
  8. Economics

    What are Noncurrent Assets?

    Noncurrent assets are property that a company owns that will last for more than one year.
  9. Investing Basics

    How Much Do CPAs Make?

    If you're considering becoming a CPA, here's what you might expect to earn.
  10. Economics

    Explaining Activity-Based Costing

    Activity-based costing (ABC) is a managerial accounting method that assigns certain indirect costs to the products incurring the bulk of those costs.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center