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 Indiana, as in other states, a line of credit and a loan are distinct financial products. A loan in Indiana is a specific amount of money borrowed that must be repaid over a predetermined period, often with interest, according to the terms of the loan agreement. In contrast, a line of credit is a flexible borrowing option that allows the borrower to draw funds up to a certain limit, repay them, and borrow again as needed. The balance can go up or down over time, depending on the borrower's use of the credit line and repayments made. This flexibility makes a line of credit similar to a credit card. 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. Indiana's regulations on these financial products are designed to protect consumers and are governed by both state statutes and federal laws, such as the Truth in Lending Act (TILA), which requires lenders to disclose terms and costs of credit products to consumers.