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Line Of Credit
A line of credit refers to an agreement between a bank or some other institution and another unit like a person, business etc. This agreement is usually personal or informal. According to this agreement the entity can borrow a predetermined amount of money that can be transferred directly to his or her account.
In simple terms, the line of credit refers to an arrangement in which the bank or vendor offers a particular amount of unsecured credit to a specified borrower for a specific period of time. It is also called as credit line.
A credit line necessarily means that the customer to whom the bank or some other entity has extended the credit limit can avail it to its fullest extent but not exceeding it. It includes a series of transactions when the line of credit of a customer is going to be exhausted. In that case, he is expected to reduce his indebtedness by making payments to the bank if he wants to further use the line of credit.
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