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 Maryland, 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 set period. Once the loan is paid off, the financial relationship ends unless a new loan is initiated. 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 makes a line of credit similar to a credit card, where the available credit replenishes as payments are made. In Maryland, lines of credit are often offered by local banks and are based on personal or business relationships with the bank. The terms and availability of lines of credit are governed by state statutes and federal laws, including the Maryland Credit Services Businesses Act, which requires certain disclosures and consumer protections, and the Truth in Lending Act (TILA) at the federal level, which mandates clear disclosure of credit terms to consumers.