Line of credit is an arrangement between a financial institution and a customer. In other words these are the terms of a credit. They define a maximum loan balance that the borrower will be allowed to maintain.
The terms offered to a customer depend on many factor like, for example, his credit history.
How does it differ from a loan?
Usually there are several advantages over loans:
- the application process is simpler (also the approval takes days, not weeks)
- a customer (borrower) can draw money at any time (of course if the credit limit is not exceeded)
- a customer isn’t charged on the money that wasn’t used
- there is more flexibility in repayments
Terms, which can mean the same: tradeline, credit line, LOC
Credit limit is the maximum amount of credit that a certain financial institution will extend to its costumer. Usually this term is used in two cases:
- a bank extends credit to its costumer,
- a credit card company extends credit on a single credit card.
What does it really mean?
A credit limit is simply the amount of money which a customer (debtor) is allowed to take on a particular line of credit (which is the commitment between a bank and its client).
Actually the second case is rather more often. Here a credit limit is the maximum amount of money that the owner (the cardholder) of the particular credit card can take out on this card. This means he or she can buy goods or services only until reaching such limit. After that the debt must be paid in order to use the credit card again.
The limit itself is based on many factors including the lenders cashflow, the debtors ability to pay his debts etc.
Terms, which can mean the same: credit cap
And we’re off!
Yep, today we launch our blog: Across the Board.
We are very proud to announce this fact, though it may seem a little strange. After all, it’s just the beginning, we haven’t written anything yet, so why the pride, right?
Maybe so, but we’ve got lots of ideas to share. And we’re truly excited about it.
We simply can’t wait to fill the blog with some really marvelous content ;)