A line of credit corresponds to the federal term "open-end credit," which the Truth in Lending Act (Regulation Z) defines as "consumer credit extended by a creditor under a plan in which: (i) The creditor reasonably contemplates repeated transactions; (ii) The creditor may impose a finance charge from time to time on an outstanding unpaid balance; and (iii) The amount of credit that may be extended to the consumer during the term of the plan (up to any limit set by the creditor) is generally made available to the extent that any outstanding balance is repaid."
A line of credit is a form of revolving credit that gives you access to funds up to an approved limit. You can withdraw, repay, and withdraw again during the draw period, and interest is generally charged only on the outstanding balance rather than the full limit. Lines of credit can be unsecured, such as a personal line of credit or a credit card, or secured, such as a home equity line of credit (HELOC) backed by real estate. Because the balance and payments can change as you draw and repay, a line of credit has no fixed number of payments and no single payoff date. This contrasts with an installment loan, which provides one amount up front and a defined repayment schedule.