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 Illinois, as in other states, a line of credit and a loan are distinct financial products. A loan is a lump sum of money provided by a lender to a borrower with an agreement to pay back the principal with interest over a predetermined period. Once the loan is paid off, the agreement ends. In contrast, a line of credit 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 then repay and re-borrow funds within the line of credit's terms. This arrangement is indeed similar to a credit card, where the available credit replenishes as payments are made. Lines of credit can be secured or unsecured and are often offered by banks with which the borrower has an existing personal or business relationship. The specific regulations governing lines of credit and loans in Illinois are outlined in the Illinois Loan Agency Act and other relevant state statutes, as well as applicable federal laws that regulate lending practices and consumer protection.