Line of Credit

Debt & Credit

A flexible loan where you can borrow up to a set limit, pay it back, and borrow again. Interest rates are usually lower than credit cards (often 6-10%). You only pay interest on what you actually borrow.

Related Terms

Interest Rate

The cost of borrowing money, shown as a percentage per year. If you borrow $100 at 10% interest, you'll owe $110 after one year. Lower is better when borrowing, higher is better when saving.

Minimum Payment

The smallest amount you must pay on a debt each month to avoid penalties. Paying only the minimum means you'll be in debt for years and pay tons of extra interest. Always try to pay more.

Debt Consolidation

Taking out one new loan to pay off multiple smaller debts. The goal is to simplify payments (one instead of many) and ideally get a lower interest rate. Imagine trading five messy piles for one organized stack.