A pre-established amount that can be borrowed on demand is a

A pre-established amount that can be borrowed on demand is a

• A. Credit Limit
• B. Debit Limit
• C. Flexible Loan
• D. Line of Credit

Answer: (D)

A line of credit is a pre-approved borrowing arrangement that lets you access funds on demand up to a set limit. You can draw money as you need it, repay what you borrow, and then borrow again, making it a revolving facility rather than a one-time loan. Interest is charged only on the amount you actually use, not the full credit limit, which gives flexibility for ongoing needs or unexpected expenses. Common examples include credit cards (a revolving line of credit) and home equity lines of credit (secured lines of credit). This differs from a fixed credit limit in that the limit is the maximum you can borrow, not the mechanism for borrowing; a debit limit applies to spending with a debit card rather than borrowing at all; and a flexible loan isn’t a standard, widely defined term for this kind of facility.

A line of credit is a pre-approved borrowing arrangement that lets you access funds on demand up to a set limit. You can draw money as you need it, repay what you borrow, and then borrow again, making it a revolving facility rather than a one-time loan. Interest is charged only on the amount you actually use, not the full credit limit, which gives flexibility for ongoing needs or unexpected expenses. Common examples include credit cards (a revolving line of credit) and home equity lines of credit (secured lines of credit). This differs from a fixed credit limit in that the limit is the maximum you can borrow, not the mechanism for borrowing; a debit limit applies to spending with a debit card rather than borrowing at all; and a flexible loan isn’t a standard, widely defined term for this kind of facility.