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 Kentucky, as in other states, a line of credit and a loan are distinct financial products. A loan is a lump sum of money that is borrowed and meant to be repaid over a set period with interest. It typically has a fixed repayment schedule and once repaid, 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 repay and re-borrow funds within the line of credit's terms. This type of credit is revolving, meaning that as the debt is paid down, more credit becomes available up to the original limit. Lines of credit can be secured or unsecured and are often established based on personal or business relationships with a bank. The specific terms and regulations governing lines of credit and loans in Kentucky would be outlined in the agreements between the borrower and the financial institution, and are also subject to state laws regulating lending and credit, as well as federal regulations such as the Truth in Lending Act (TILA) which requires lenders to disclose credit terms to consumers.