What Are Line of Credit Loans?

The purpose of a line of credit loan is to provide a borrower with access to a source of funding to meet a short-term need. Like bridge loans, a line of credit loan fills a gap that exists between a present need and a secondary source of funding, such as an individual’s next paycheck or a grant to a business funding a project.

Line of Credit Loan Defined

A line of credit is defined as an extension of credit based on existing equity or collateral with value. A line of credit is an amount that a borrower can access up to the maximum amount of equity and must be paid back like any other type of loan.

Line of Credit Loan Requirements

A line of credit loan carries financing and interest charges when utilized. The line of credit has to be paid back, either on an installment basis or when due based on a negotiated time period.

 


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