---
title: "Line of credit: definition | Desert Rock Capital"
url: "https://www.desertrockcapital.com/glossary/line-of-credit"
description: "A line of credit is a set borrowing limit you can draw from as needed, repay, and draw from again, rather than receiving the full amount once."
---

Loan types

# Line of credit
All lending terms
Definition

A line of credit is a set borrowing limit you can draw from as needed, repay, and draw from again, rather than receiving the full amount once. Interest is typically charged only on the portion actually borrowed.

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.

Source: [Consumer Financial Protection Bureau](https://www.consumerfinance.gov/ask-cfpb/what-is-a-personal-line-of-credit-en-901/). This definition is general educational information, not legal or financial advice.
Related

- [Personal loans](/services/personal-loans)
- [Compare: vs. credit card debt](/compare/credit-card-debt)
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