A line of credit is a type of loan which provides the business or an individual with a set amount of money for a specific period. It offers more flexibility than a traditional loan. The borrower only pays interest on the money they borrow, not the total amount. This loan can be used for whatever the borrower wants. They do not need to tell the bank what they are using it for as long as they pay back what they borrowed and the agreed-upon interest.
The borrower may make payments in a lump sum at the end of each month, or they may make smaller payments throughout the year. They can do this because they only pay interest on what they borrow. This differs from a loan where the borrower pays back the total amount plus interest over time.
What are the benefits of a Line of Credit?