Lines of credit or LOCs are sometimes confused with traditional loans. But they offer a way to cover large expenses when other loan options may not work. They give you access to funds quickly and flexibly. A credit card is also a line of credit.
With a line of credit, you can withdraw only what you need, when you need it. This differs from mortgages and personal loans, when you would receive the full amount of the loan upfront, repaying it through fixed monthly payments.
Common uses for lines of credit include:
- Long-term projects
- Education expenses
- Debt consolidation
- Cash flow management (when you need money to cover a gap in income or an unexpected cost)