A line of credit is different from a loan in that a loan is a fixed sum of money repaid over a fixed term (period of time), and a line of credit is a revolving account a creditor can borrow against, withdrawing funds up to the maximum amount of the line of credit, and paying-down the line of credit at any time, with the balance fluctuating over time. Thus, a line of credit is more similar to a credit card account, but is usually provided by a local bank based on the debtor’s personal or business relationship with the bank.

In Connecticut, as in other states, a line of credit and a loan are distinct financial products. A loan in Connecticut is a lump sum of money provided to a borrower with an agreement to repay the principal with interest over a predetermined period. This is a one-time transaction until the loan is fully repaid. On the other hand, a line of credit in Connecticut is a flexible borrowing option where the borrower is approved for a maximum amount and can draw funds up to that limit as needed. The borrower can repay and re-borrow funds within the line of credit's terms. Interest is typically charged on the amount borrowed, not the entire credit line. Lines of credit can be secured or unsecured and are often offered by local banks, with terms based on the borrower's personal or business relationship with the bank. The regulatory framework for both loans and lines of credit includes state statutes that govern lending practices and federal laws such as the Truth in Lending Act (TILA), which requires lenders to disclose credit terms to consumers in a clear manner.