What is the meaning of line of credit?

line of credit is a type of credit facility. The specific meaning of the term varies from bank to bank. Since the various uses often cause confusion, two definitions are presented here. In this book, the second definition is used. 1. A type of loan that permits a borrower to draw funds, up to a specified maximum, for a defined period of time. Sometimes called a nonrevolving line of credit. 2. Any loan that permits the borrower to borrow funds up to a specified maximum, make repayments in any amount at any time, and obtain any number of readvances so long as the maximum is not exceeded. Sometimes called a revolving line of credit. The distinguishing feature of a line of credit is that it rebounds, which means that the amount borrowed can be paid down and reborrowed, or readvanced, as the borrower's needs change.