Line of credit

Lines of credit are funds that a lender promises to make available on demand, up to a set maximum amount, for a borrower. The borrower can draw as much of the maximum amount as he needs at any given time. Typically, the lines must be "paid down" or brought to a zero balance at least once during a given time period, e.g., six months. Lines of credit can be revolving, straight, of fixed. A revolving line of credit allows for continual fluctuation in the amount being used at a given time; interest is assessed only on the amounts actually borrowed. A straight line is basically the same as a short term loan with a single balloon payment due at the end of the term. A fixed line is typically a very short term loan of a set amount of money, and the line is "paid down" out of specific cash proceeds.