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. Revolving Credit

    A line of credit where the customer pays a commitment fee and ...
  4. Revocable Trust

    A trust whereby provisions can be altered or canceled dependent ...
  5. Line Of Credit - LOC

    An arrangement between a financial institution, usually a bank, ...
  6. Capital Expenditure (CAPEX)

    Funds used by a company to acquire or upgrade physical assets ...
RELATED FAQS
  1. How is accounting in the United States different from international accounting?

    Despite major efforts by the Financial Accounting Standards Board, or FASB, and the International Accounting Standards Board, ... Read Full Answer >>
  2. What is the variance/covariance matrix or parametric method in Value at Risk (VaR)?

    The parametric method, also known as the variance-covariance method, is a risk management technique for calculating the value ... Read Full Answer >>
  3. How are transfer prices set?

    The United States, like most nations, does not want to allow transfer pricing methods that reduce the amount of taxes the ... Read Full Answer >>
  4. What is backtesting in Value at Risk (VaR)?

    The value at risk is a statistical risk management technique that monitors and quantifies the risk level associated with ... Read Full Answer >>
  5. How do I discount Free Cash Flow to the Firm (FCFF)?

    Discounted free cash flow for the firm (FCFF) should be equal to all of the cash inflows and outflows, adjusted to present ... Read Full Answer >>
  6. What's the difference between a confidence level and a confidence interval in Value ...

    The value at risk (VaR) uses both the confidence level and confidence interval. A risk manager uses the VaR to monitor and ... 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. Economics

    Understanding Carrying Value

    Carrying value is the value of an asset as listed on a company’s balance sheet. Carrying value is the same as book value.
  6. Economics

    International Financial Reporting Standards (IFRS)

    International Financial Reporting Standards are accounting rules and guidelines governing the reporting of different types of accounting transactions.
  7. Economics

    Explaining Property, Plant and Equipment

    Property, plant and equipment are company assets that are vital to business operations, but not easily liquidated.
  8. Economics

    How to Calculate Trailing 12 Months Income

    Trailing 12 months refers to the most recently completed one-year period of a company’s financial performance.
  9. Economics

    What is Unearned Revenue?

    Unearned revenue can be thought of as a "pre-payment" for goods or services which a person or company is expected to produce to the purchaser.
  10. Economics

    What is a Capital Lease?

    A lease considered to have the economic characteristics of asset ownership.

You May Also Like

Hot Definitions
  1. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  2. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  3. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  4. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  5. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  6. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
Trading Center