What exactly is a LOC?

[AvaMommy]

I know it stands for Line Of Credit? But whats the benefit of it?

[chasmith]

It's revolving credit you access by checks or transfers instead of a credit card.  So you can draw money, pay it down and draw it again.  If it's secured by your home it is a HELOC (Home Equity LOC).  Often the interest rate is lower than on a credit card.

[CS800]

It is like a sum of money available to you just in case like a personal loan that you can borrow against. Generally also as a form of overdraft protection

You can make payment straight from the LOC using checks or bank transfers.

[AvaMommy]

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@chasmith wrote:

It's revolving credit you access by checks or transfers instead of a credit card.  So you can draw money, pay it down and draw it again.  If it's secured by your home it is a HELOC (Home Equity LOC).  Often the interest rate is lower than on a credit card.

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Thanks! How is it reflected on credit report?

[AvaMommy]

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@CS800 wrote:

It is like a sum of money available to you just in case like a personal loan that you can borrow against. Generally also as a form of overdraft protection

You can make payment straight from the LOC using checks or bank transfers.

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Thanks! CS

[firesoul453]

Credit cards are a line of credit, but usually it refers to any credit line thats not a credit card.

For example, I have a reserve line of credit with us bank. If I overdraw my account, they take it out of the line of credit, or a can transfer some out manually if I want.

Paypal also has given me a line of credit, which is exatly like a credit card, but no physical card.

Often (if its just an unsecured line) they have little to no benefits and often no interest free perioid.

[CS800]

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@AvaMommy wrote:

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@chasmith wrote:

It's revolving credit you access by checks or transfers instead of a credit card.  So you can draw money, pay it down and draw it again.  If it's secured by your home it is a HELOC (Home Equity LOC).  Often the interest rate is lower than on a credit card.

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Thanks! How is it reflected on credit report?

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My LOC reports as a 'Line of Credit' with a credit limit

[chasmith]

It's revolvig debt, reports "like" a credit card (balance, credit limit) and affects Utilization.

[AvaMommy]

Ok Gotcha!