Glossary
Line of credit
A revolving credit limit you can draw from, repay, and draw again — you pay interest only on what you actually use.
Unlike an installment loan that hands you a lump sum, a line of credit gives you a ceiling you borrow against as needed, repay, and reuse — like a credit card without the card. A HELOC is a line of credit secured by your home; a personal line of credit is unsecured; a business line of credit covers working-capital gaps. It suits recurring or unpredictable needs, where you want flexibility, more than a one-time expense you can size up front.
Related terms
- Charge-off When a creditor gives up trying to collect a debt through normal billing and writes it off as a loss — typically after 180 days of non-payment.
- DTI Debt-to-income ratio: monthly debt payments divided by gross monthly income. Most lenders draw the line at 36–43%.
- APR Annual percentage rate — the interest rate plus mandatory fees, expressed as one yearly cost. The only honest way to compare two loan offers.
- Fixed rate An interest rate that never changes for the life of the loan — your payment is the same every month.
- Reverse mortgage A loan for homeowners 62+ that pays you from your home equity instead of the other way around — repaid when you sell, move out, or pass away.
- Credit score A 300–850 number summarizing your credit risk. It is the single biggest lever on the rate a lender offers you.