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 Massachusetts, a line of credit and a loan are distinct financial products. A loan is a specific amount of money borrowed that must be repaid over a set period, often with a fixed repayment schedule and interest rate. 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. The balance can go up or down over time, depending on the borrower's use and repayments, much like 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. Massachusetts state statutes and federal laws regulate both loans and lines of credit, ensuring consumer protection and fair lending practices. Borrowers should be aware of the terms and conditions, including interest rates, fees, and repayment obligations, associated with each type of credit before entering into an agreement.