A line of credit is a flexible loan option that allows individuals or businesses to borrow money up to a specified limit. Unlike a traditional loan, where you receive a lump sum, a line of credit lets you withdraw funds as needed, making it useful for managing cash flow or unexpected expenses. Interest is only charged on the amount borrowed, not the total credit limit. Lines of credit can be secured or unsecured. A secured line of credit requires collateral, such as a home or savings account, while an unsecured line of credit does not. Lenders typically assess creditworthiness to determine eligibility and interest rates.