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Simple English definitions for legal terms
credit line
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A quick definition of credit line:
Credit Line: A credit line is a type of loan that allows you to borrow money up to a certain limit. It's like having a credit card, but instead of using it to buy things, you can use it to get cash or pay bills. You only have to pay interest on the amount you borrow, and you can keep borrowing as long as you don't exceed the limit. Think of it like a pool of money that you can dip into whenever you need it.
A more thorough explanation:
Definition: A credit line, also known as a line of credit, is a type of loan that allows a borrower to access funds up to a certain limit. The borrower can withdraw money as needed and only pays interest on the amount borrowed.
Example: Sarah has a credit line of $10,000 with her bank. She uses $5,000 to pay for a home renovation project. She only pays interest on the $5,000 she borrowed, not the full $10,000 credit line.
Explanation: A credit line is a flexible form of borrowing that allows the borrower to access funds as needed. The borrower can use the funds for any purpose and only pays interest on the amount borrowed. In the example, Sarah only needed $5,000 for her home renovation project, so she only pays interest on that amount. If she needs more funds in the future, she can withdraw more money up to her credit line limit.